The Scale of the UK Financial Sector
In 2021, financial services accounted for 8.3% of UK GDP, generating more than £170 billion and providing 3% of all jobs. The sector also produced a trade surplus of nearly £45 billion. Only Luxembourg, Switzerland and the United States saw a larger proportional contribution from finance.
Despite this complexity, a 2022 survey by the City of London Corporation and HM Treasury found that global firms consider the UK the world’s most attractive regulatory regime. Recent developments help explain why.
Major Fines and Enforcement Actions
The FCA has imposed several significant penalties. NatWest received a £264 million fine following a criminal prosecution for 3 offences under the Money Laundering Regulations. HSBC was fined £63.9 million for failures in anti‑money laundering controls. Credit Suisse must pay £147.2 million for due diligence gaps and corruption‑linked loans to Mozambique.
These figures exceed many pre‑pandemic penalties. In 2018, Tesco Bank was fined £16.4 million for cyber protection failures, Santander £32.8 million for account processing issues, and UBS and Goldman Sachs £27.6 million and £34 million respectively for transaction reporting breaches. The trend continued in 2022, with Citigroup Global Markets fined £12.6 million for insufficient trade surveillance under the Market Abuse Regulation.
The FCA’s powers extend beyond corporate entities. In August 2022, Sir Christopher Gent, former non‑executive Chair of ConvaTec Group, was fined £80,000 for unlawful disclosure of inside information in breach of the EU Market Abuse Regulation. Custodial sentences are also possible. In 2018, six individuals involved in Operation Tidworth were sentenced to a combined 28.5 years’ imprisonment for defrauding investors of more than £2.8 million. The investigation involved 140 witness interviews, 1.4 million documents and extensive search operations.
The FCA also uses asset recovery tools such as Account Freezing Orders and Account Forfeiture Orders under the Proceeds of Crime Act 2002 and the Criminal Finances Act 2017. In one recent case, £2 million was frozen and forfeited from fintech start‑up QPay Europe. Practitioners note that thresholds for these orders are relatively easy to satisfy, and their use is increasing. The FCA must also notify the Office of Financial Sanctions Implementation of potential sanctions breaches, which may lead to asset freezes.
Recent Regulatory Updates
Crypto assets remain under strict scrutiny. Nearly 80% of firms applying for registration under the Money Laundering Regulations were refused, and the FCA published a list of unregistered firms in June 2022 to protect consumers.
The FCA also issued a consultation paper on the regulatory perimeter for trading venues, including regulated markets, organised trading facilities and multilateral trading facilities. The aim is to clarify permissions required for firms operating multilateral systems, given technological developments. Feedback is invited until 11 November, after which updated guidance will be added to the Perimeter Guidance Manual (PERG) in spring 2023.
The regulator has also warned that financial promotions for Buy Now Pay Later products must comply with financial promotion rules. Promotions by unauthorised firms must be approved by authorised firms, and misleading promotions may constitute criminal offences. By mid‑August, more than 4,000 promotions had been amended or withdrawn.
On 8 December, new rules on the Appointed Representatives regime will take effect. Principals must provide additional information to the FCA, conduct enhanced oversight and complete annual reviews. The aim is to reduce consumer harm caused by weak controls and insufficient due diligence.
Strategy and Reform Proposals
The FCA has introduced the Consumer Duty, a major reform requiring firms to demonstrate good outcomes for customers across four areas: products and services, price and value, consumer understanding and consumer support. The Duty applies to new products and services from 31 July 2023. Whether it will achieve the intended cultural shift remains to be seen.
In September, Sarah Pritchard, the FCA’s executive director of markets, warned that financial crime attempts may rise during the cost‑of‑living crisis. She urged firms to increase vigilance against loan fee fraud, authorised push‑payment fraud, ghost broking and pension rebate scams. She also emphasised the need for faster intelligence sharing and closer cooperation between agencies.
Conclusion
The FCA’s recent enforcement actions and regulatory initiatives demonstrate the depth and breadth of its oversight. Law firms must monitor these developments closely. They must assess how regulatory changes affect clients’ business models and competitive positions, and advise on strengthening processes and controls, particularly in preparation for the Consumer Duty.
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