In this week’s roundup, FCA publishes independent review into whistleblowing cases, OPBAS highlights inconsistencies in PBS supervision, plus other news and updates from the FCA.
Rules and consultations
In July this year, the FCA introduced a set of new rules which required banks and building societies to weigh up if local communities lacked access to cash services, such as branches and ATMs, and to plug any significant gaps uncovered.
Now, two months later, the FCA says there are early signs that those rules are already working, and that certain communities are set to reap the benefit.
In a press release last week, the FCA has said that, “LINK, which manages the UK’s cash access and ATM network, has reassessed the needs of local areas where banking services are changing.”
As a result of this:
- 15 communities, which had not previously been assessed as needing a banking hub, will now get one;
- 6 communities will now have an ATM at their banking hub; and
- 6 areas will get an automated deposit service or enhanced Post Office.
Sheldon Mills, executive director for consumers and competition at the FCA said that the “way we spend money is changing, and far fewer of us use cash day-to-day. We don’t want to stand in the way of change, but we do want to ensure reasonable access for those who continue to rely on cash.”
Also last week, the FCA published a statement highlighting its “forbearance given the Government’s intention to exclude some investment trusts from the PRIIPs Regulation and other assimilated law.”
With the government keen on replacing the EU-inherited Packaged Retail and Insurance-based Investment Products (PRIIPs) Regulation with a new framework for Consumer Composite Investments (CCIs), the FCA says there were concerns from the industry “about the operation of current costs disclosure requirements under assimilated law, and how it is affecting the closed-ended listed investment fund sector.”
As a result, The FCA has said it is immediately applying a revised forbearance policy to address some of those concerns:
“From 19 September 2024 until legislation to amend the PRIIPs Regulation comes into force, closed-ended investment funds whose ordinary shares (of each class if there is more than one) are admitted to trading on a UK regulated market or a UK multilateral trading facility may choose not to follow the requirements of the PRIIPs Regulation and associated technical standards. They may also choose not to follow the requirements of Article 50(2)(b) and Article 51 of the MiFID Org Regulation.”
The FCA has reiterated that it “will not take supervisory or enforcement action if a fund chooses not to follow those requirements.”
In the longer term, the FCA has signalled its intention “to consult on proposed rules for the CCI regime this autumn.” The regulator says it “aims to finalise the rules in H1 2025, at which point firms will be able to begin transitioning to the new regime.”
Publications
The FCA has published an independent review into the handling of whistleblowing communications raised by two of its former employees. The two individuals had accused the FCA chair, Ashley Alder, of not keeping their identities confidential after they had raised their concerns.
As a result, the FCA board’s senior independent director, Richard Lloyd, carried out an independent review to see if there was any truth to the allegations.
In his conclusion, Mr Lloyd found that while the FCA’s chair did not follow the existing policy “to the letter in handling two complex cases, he had sought to ensure the concerns raised, if appropriate, were acted on.”
Mr Lloyd concluded that the chair “consulted senior colleagues confident they would treat the information with the utmost care” and that he “reasonably took the view” that he was providing information of which those colleagues were already aware, the FCA has said in a statement.
The senior independent director has also made some recommendations for strengthening the body’s internal whistleblowing policy, which is already under review.
In his response to the publication of the review, FCA chair Ashley Alder has accepted that he did not follow the policy to the letter in the two individual cases. However, he insists that, in order to deal with the cases, he needed to consult a limited number of senior colleagues who would have treated that information with utmost care.
According to the FCA the chair “remains committed to ensuring that all FCA employees retain the utmost confidence in our whistleblowing policy”.
Also last week, the FCA published an update on the actions It taken since the July 2023 cash savings market review, and the work it had done with the largest 9 firms on the value they provide.
According to the update, “average interest paid on easy access savings accounts rose to 2.11% in June 2024, up from 1.66% in July 2023.”
It adds that “while firms were benefitting as base rates increased, these benefits were increasingly passed to savers.”
The FCA also said it had prepared a useful document about the good and poor practices in relation to 3 markets – cash savings, GAP insurance and cash on investment platforms.
The regulator says “the findings will be relevant to all firms who need to demonstrate that their products provide fair value to retail customers.”
Speeches and media
The Office for Professional Body Anti-Money Laundering Supervision (OPBAS) has called upon the Professional Body Supervisors (PBS) to show more consistency in their supervision of anti-money laundering activities.
OPBAS has said its latest report “found weaknesses in how PBSs were using enforcement powers and tools to supervise members, with the number and value of fines issued declining on the previous year.”
The report adds that “Effective anti-money laundering (AML) supervision undertaken by professional body supervisors (PBSs) is crucial in ensuring that the legal and accountancy professions help safeguard the integrity of the UK’s economy and reputation as a global financial centre.”
OPBAS works within the FCA’s framework and is tasked with overseeing the functioning of 25 PBSs. Its overall responsibility is to look out for any money laundering activity in the legal and accountancy sectors.
Elsewhere, the FCA’s director of the special directorate, Andrea Bowe, delivered a speech at the Westminster Legal Policy Forum Keynote Seminar on 5 September (published on FCA website on 17 September).
She spoke about frameworks that would make the existing fraud prevention measures in the land more effective. Ms. Bowe emphasised that fraud not only result in financial loses for individuals but also weakened our sense of security as a society. Other key points points from the speech included:
- Fraud makes up 36% of all crime reported in England and Wales. 3.2m incidents reported in the year to March 2024. This represents a fall of 16% on the year before with half a million fewer victims.
- Scam related complaints have reached their highest level since early 2018.
- Collaboration and a collective effort are key to tackling fraud.
- Cyber and identity fraud are increasing in scale, sophistication and impact as AI becomes more widespread and more sophisticated social engineering and deepfake technology is exploited by criminals.
- Addressing mule activity is an area where collective efforts by firms can have a substantial impact on disrupting and greatly reducing the flow of fraudulent funds.
FCA chief executive Nikhil Rathi also delivered a speech on “Catalysing productivity and growth: A change in mindset on financial inclusion” at Stepchange on 19 September 2024.
The main theme of the speech was that “financial inclusion, approached thoughtfully, can actually catalyse productivity and growth.” Other highlights included:
- Financial inclusion and growth need not be mutually exclusive.
- There cannot be genuine financial inclusion without digital inclusion.
- Delivering on these objectives will require a change in mindset, a different conversation about risk and innovation, and a systemwide effort – not just for government and regulators, but also for employers and schools.
Enforcement
Last week, the FCA published its Second Supervisory Notice setting out the action it took against Promethean Finance Limited in June 2023, and the basis for that action.
After the FCA’s initial decision against the firm in June 2023, Promeathan had taken its claim to the Upper Tribunal. On 5 August 2024 the Tribunal announced its decision and “found that the FCA’s decision to impose requirements on Promethean was reasonable and that the requirements were proportionate to concerns identified.”
The FCA has said the deadline for Promethean to appeal against the decision had passed and the requirements which were imposed on it in June 2023 remain in effect.