FCA Combats Financial Crimes with Major Reforms

FCA reforms financial crime – Spearheads dynamic changes in the UK’s financial and cryptocurrency markets for enhanced regulatory effectiveness. The Financial Conduct Authority (FCA) is substantially transforming its regulatory capabilities. A recent report from the National Audit Office (NAO) has shed light on the urgency of managing these changes effectively to keep pace with the evolving landscape.

The NAO report underscores the FCA’s efforts to adapt to its expanded responsibilities and address regulatory shortcomings. However, it points out a critical challenge—the shortage of specialized personnel, causing delays in responding to the growing scale of financial crimes. With the UK’s financial services industry valued at over £170 billion and the FCA regulating approximately 50,000 firms, the need for swift and effective regulatory measures is evident.

Gareth Davies, the Head of NAO, acknowledged the FCA’s significant reform, stating, “The FCA is undergoing significant reform, responding to changes in the financial services regulatory framework and making operational changes intended to improve performance.”

FCA Reforms Financial Crime

The Financial Services and Markets Act 2023 (FSMA 2023) granted the FCA greater authority to develop regulations and introduced a secondary objective of promoting the UK’s international competitiveness. The NAO report scrutinizes the FCA’s response to these enhanced powers and its ability to keep up with fast-paced market changes.

Despite its proactive stance, the FCA has faced delays in addressing issues and enforcing regulations. Notably, it required additional legislative support to regulate “Buy Now Pay Later” credit providers. In early 2023, despite a significant surge in reported incidents from 2020 to 2021, the FCA initiated enforcement against illegal crypto ATMs, addressing delays in tackling crypto-scams.

To tackle these challenges, the FCA invested £317 million in its transformation program from 2020 to 2023, resulting in a 16% increase in staffing to counter high turnover rates. Recruitment efforts focused on acquiring specialist skills, particularly in the crypto sector, where registration and enforcement faced hurdles due to skill shortages.

The NAO recommends that the FCA refine its operational processes, collaborate with stakeholders to assess new accountability arrangements, provide clearer performance metrics, and develop a long-term workforce plan. The FCA is also actively enhancing its data management capabilities, upgrading its data lake, and creating tools for better information access and analytics to mitigate data risks and improve operational efficiency.By 2024, the FSMA 2023 will empower the FCA to establish new mechanisms for independent accountability, a crucial step in ongoing reform.

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