• Robert Bell

Financial Services Regulation Round-Up: April 2021

As always, we aim to keep you right up to date with all matters to do with financial services regulation and compliance, as such we have produced a “regulation round-up” summarising recent key updates.


Financial Services Regulation Round-Up: April 2021

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AML and Financial Crime Course

Pre-contract consumer credit information forms

The FCA has published a reminder about changes to pre-contract consumer credit information forms that consumer credit firms need to make from 1 June 2021.


The FCA warns that if the changes are not made, then the credit agreement may only be enforceable against the debtor on an order of the court under the Consumer Credit Act 1974.


Firms that are subject to Regulation 8 of the Disclosure Regulations have been able to comply with the requirements by using either the Standard European Consumer Credit Information form, or the post-Brexit ‘Pre-Contract Credit Information’ form, with the reference to the ‘creditor’s representative in your Member State of residence’ amended to read ‘the creditor’s representative in United Kingdom.


From 1 June 2021, firms must only use the new post-Brexit ‘Pre-Contract Credit Information’ form.


Firms that are subject to Regulations 10 and 11 of the Disclosure Regulations, and firms subject to CONC 2.7.2R(4)(a) have been able to comply with their obligations through the use of the European Consumer Credit Information form, with references to the UK being in the EU, but from 1 June, they must only use the new Pre-contract Consumer Credit Information (Overdrafts) form.


Misleading financial promotions – quarterly data

The FCA has published quarterly data on the number of financial promotions that have been amended or withdrawn due to non-compliance with FCA Handbook rules.


The FCA look at every advert that is reported to them, and where they find that an advert is in breach of the rules, they will then ask the firm to either withdraw it or change it so that it does comply.


In addition, the Regulator might also ask firms to act to put right any harms if customers might have acted on the basis of the non-compliant advert.


In Q1 2021, they reviewed 441 financial promotions, and 38 cases resulted in 105 promotions being amended or withdrawn. A breakdown of the cases that have resulted in a promotion being amended or withdrawn shows that 47% of the cases were in retail lending, 26% in retail investment and 18% in retail banking. Around 75% of the requirement to amend or withdraw cases related to either website or social media promotions.


FCA 2021/22 Business Plan

The FCA has confirmed that it will release its Business Plan in July 2021, postponed from April. The Business Plan will include an update on the Regulator’s plans for transforming the FCA.


Revised Standards of Lending Practice for personal customers

The revised Standards set out how firms are expected to deal with their customers during the entire product lifecycle. They apply across digital, brank and telephony networks, and cover overdraft, credit card, chargecard, and unsecured loan products and services, and are updated to recognise that customers are increasingly accessing credit and communicating with lenders through a variety of digital channels.


The Standards use a customer outcomes focussed approach which provides flexibility for firms to achieve good customer outcomes while conducting their business in a way that meets the evolving needs of customers. The Standards will become effective from 1 July 2021. The LSB are also aiming to update their Information for Practitioners documents regularly.


The importance of purposeful AML controls

The FCA have published a speech by Mark Steward, delivered in late March to the AML & ABC Forum. The speech notes that two of the FCA’s biggest sanctions over the past year have related to failures to address financial crime and AML risks, and that there are currently 42 active investigations. These investigations cover issues including systems and controls over politically exposed persons, transaction monitoring and customers with significant cash intensive operations.


The first criminal proceeding against a bank under the Money Laundering Regulations 2007 has now commenced – the issue in this case is the failure to monitor and scrutinise significant levels of cash deposited by a UK incorporated customer.


Some of the FCA’s main findings against firms over the past 12 months include:


  • Inadequate processes

  • Lack of clear process or criteria for terminating a relationship with a customer based on financial crime risks

  • Substantial and unjustified backlogs in know your client checks

  • Failing to adequately explore major risks, none of which were hard to spot

  • An absence in keeping proper records of the identification, management and assessment of substantial risks, which should go beyond simple minuting, and be substantial enough to explain why a decision was reached

In a case jointly considered with the PRA, a high-risk transaction was not adequately investigated, and too much reliance was placed on information presented by the team which had a stake in the transaction being processed, meaning that risks were not raised or assessed independently.


The FCA highlights that white collar crime is often invisible or believed not to really exist, this means that some are able to commit a crime more easily, particularly where there is no directly experienced harm. For much of financial services, the risks are not limited to white collar crime and extend to criminal proceeds, the consequences of AML control failures can still be a life and death matter.


Steward notes that the FCA’s aim here is not to catch firms out, but to set high standards so that illicit money does not flow into the financial system.


Our AML and Financial Crime course is designed to help staff understand what financial crime is, how to recognise it, and how to prevent it. The course covers relevant law and practical issues, such as customer due diligence, record keeping and reporting.


Our online course, priced at just £15, is accessible at the delegate’s convenience, and provides a certificate upon successful completion, allowing firms to track and record each user’s progress. For large groups, we can offer a simplified enrolment service and pricing, simply email Robert.bell@rbcompliance.co.uk.




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