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- Robert Bell
Regulatory Update: March 2024
The FCA has published a webpage setting out a review of their findings around what firms are doing well and what they could be doing better. Under six different headings (culture, governance and monitoring, consumers in vulnerable circumstances, and the four outcomes), the review gives short bullet point suggestions of good practice and areas for improvement.
Good practice suggestions tend to be fairly high-level, which means that everyone, regardless of firm type, will have something to take away from the findings.
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Most of the concerns at this stage centre on a failure to share appropriate information at the right time, generalisation, lack of proactivity and failure to identify or act on weaknesses.
Good practice suggestions highlight the priority that the FCA places on tailoring products, communication and support to the customer, accelerated changes following findings, clarity of responsibility and accountability and good use of data.
One of the most repeated aspects of good practice is good training that enables staff to understand and support customer needs, how to tailor communications, and how to identify where customers may be vulnerable. A key area for improvement around consumer support notes that some firms are not training “staff well enough in terms of having complex conversations with customers.” The FCA expects firms to train their staff to an appropriate level so that they are able to support good outcomes, for example by understanding their circumstances and finding tailored solutions when needed.
Our full range of compliance training courses has been updated for 2024. Courses now include interactive scenarios and our vulnerable customers course teaches staff how to start and manage those difficult conversations. Visit Corporate Compliance Training | RB Compliance Consultancy for more information.
FCA writes to CEOs about money laundering failures
Annex 1 firms will have received the letter, setting out the FCA’s findings from the regulator’s recent assessments on compliance with money laundering regulations. Common weaknesses include:
Discrepancies between firms’ registered and actual activities, plus a lack of Financial Crime controls in line with business growth
Weaknesses in business-wide risk assessments and customer risk assessments
Lack of detail in due diligence and ongoing monitoring policies and procedures, creating ambiguity around actions staff should take to comply with their obligations under the MLRs
Lack of resources for Financial Crime, inadequate Financial Crime training and absence of a clear audit trail for Financial Crime related decision-making.
Affected firms are expected to complete a gap analysis around each of the weaknesses outlined within six months of receipt of the letter.
The FCA is responsible for supervising the anti-money laundering controls of businesses that offer certain services but are not otherwise regulated by the FCA, including lending, financial leasing, providing payment services, issuing and administering other means of payment, offering guarantees and commitments, trading for own account, money broking, etc.
Future workforce speech highlights importance of culture
A speech delivered by Emily Shepperd, Chief Operating Officer and Executive Director of Authorisations on 5 March aimed to highlight the importance of tapping into skills markets outside London. Shepperd noted that this tactic helps firms to better reflect consumer demographics – very much in line with the wider requirements of the Consumer Duty.
Improving diversity and Inclusion are also noted as positive outcomes; recruiting people from different backgrounds will help firms to be able to more fully articulate their purpose and plan to achieve goals, particularly if firms work to get those from different backgrounds into managerial roles and ‘listen to their voices.’ Noting that in 2022 the UK remained the world’s preferred regulatory regime for financial services, the focus on attracting and retaining the right talent should help to keep the UK’s financial services industry on track.
APP fraud: Draft legislation published
The government has published draft legislation that allows payment service providers (PSPs) time to investigate suspicious payments. The amendments would allow a PSP to delay an outbound payment – for up to four days - within the UK where it has reasonable grounds to suspect the payment order results from fraud or dishonesty by someone other than the payer.
Under current rules, once the payment order is received, the payer’s PSP must finalise the transaction by the end of the next business day.
The delay can only be used where the PSP has reasonable grounds to suspect fraud or dishonesty, and only where they need further time to contact the customer or law enforcement. The PSP must inform customers of the delay, the reasons for the delay, and any appropriate information or actions needed from the customer to help the PSP decide whether to make the payment. PSPs will be liable for any interest or charges resulting from a delay to payments.
The changes are due to take effect on 7 October 2024.
Research highlights barriers to access to financial products for young people
Research by Tink shows that younger age groups face significant barriers when it comes to accessing credit. A survey of 1000 UK borrowers found that 78% of 18-34 year olds have had a loan application rejected, mostly due to thin credit history and inability to prove their financial history.
The research also shows younger age groups abandon longer applications, suggesting a low tolerance for friction-filled processes. A major concern was needing to submit documents physically (e.g. via the post, rather than digitally).
Reviewing the friction in application processes is good practice in light of the consumer duty; this research highlights that when it comes to friction, positive friction (making customers aware of the consequences of cancelling a contract, for example) is beneficial for customers, but friction that impacts on the customer’s effort, where there is no regulatory reason for it, is likely to put the customer off, and might even be viewed as poor practice by the FCA, particularly where it could be impacting vulnerable customers.
FCA publishes information on preparing wind-down plans
The FCA asks some firms applying for authorisation to submit a wind-down plan. To support those firms, it has published a webpage setting out how to prepare the plan. The guidance takes firms through the appropriate steps, including identifying steps and resources needed to wind down the business, evaluating the risks, identifying scenarios that could lead to the firm no longer being viable, creating the plan with the aim of steering the firm to wind down its business in an orderly manner, conducting a resources assessment and creating and implementing processes.
Our online training courses introduce new staff to regulatory requirements, key legislation and process, and offer excellent refresher training for established staff, with up-to-date scenarios and soft skills training. Our full range of e-learning courses have been updated for 2024: Online Compliance Training | RB Compliance Consultancy
