Cryptoasset marketing and the rules around Politically Exposed Persons have been making headlines over the summer, and the FCA’s two major announcements this week covered each area. Executive Director of Markets Sarah Pritchard also gave a major speech to the Financial Crime Summit, setting out the FCA’s work and future approach.

Enforcement

6 Towns Credit Union was placed into administration on September 6. James Sleight and Peter Hart of PKF Geoffrey Martin & Co have been appointed as joint administrators.

Rules and consultations

Terms for reference for the regulator’s review of how firms deal with UK-based Politically Exposed Persons (PEPs) were published, with a deadline of June 2024 set for reportback. No changes to the law underpining the PEPs regime will be considered. Instead, the FCA will consider:

• how the PEPs regime is applied to individuals;
• the conduct of risk assessments on PEPs, their family members and associates;
• the application of due diligence;
• how decisions on rejecting or closing accounts are made;
• the effectiveness of communication with PEP customers;
• review processes of PEP controls.

Sarah Pritchard, Executive Director of Markets at the FCA, said: “These rules follow international standards and are designed to keep the financial system clean, free from corruption and guard against financial crime. It’s important that they are implemented proportionately and don’t create unnecessary barriers for public servants and their families.”

The Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017

Speeches and media

“Financial crime risks differ. Risk calibration is important. Technology has a great role to play – but do not outsource all responsibility to your third-party providers – understand your clients, their level of risk, and act proportionality.”

That was the conclusion of a speech given by Sarah Pritchard, Executive Director of Markets, and Executive Director of International to The Financial Crime Summit 2023 in London. She warned firms to “expect spot checks” on their financial crime-fighting systems, and said “We will increase our focus on whistleblowing in high-risk sectors”.

Summing up the FCA’s work over the year, she said more than 8,500 misleading adverts had been removed, 352 proactive assessments carried out – four times as many as in the previous year – and 610 financial crime supervision cases opened, an increase of 65% year-on-year.

New cryptoasset marketing rules are set to come into place in the UK on October 8, and the FCA set out expectations in a statement.

The new rules say crypto asset marketing must be “clear, fair and not misleading”, come with prominent risk warnings and must not inappropriately incentivise people to invest. On the latter point, refer a friend bonuses will be banned from October 8.

Recognising the challenges the new rules present, the FCA has said it will consider giving crypto asset firms more time to to implement certain changes, but the firms must apply for flexibility. Firms could be given until January 8 , 2024 to comply with rules that are shown to require greater levels of technical development to implement.

PS23/6: Financial promotions rule for cryptoassets.