Compliance Digest: 12th January 2024

This is a summary of some of the regulatory issues that have come from my various news feeds this week.  A bit of a bumper edition with some chunky hotlinks which may be useful reference points as we progress through the first quarter of 2024.

• Consumer Duty: the next steps

• Four anti-money laundering changes to watch out for in 2024

• UK high net worth individual and sophisticated investor exemptions updated

• Clyde & Co fined £500,000 after admitting due diligence failure

• The Plenitude Regulatory Intelligence team has published its 2023 recap and 2024 outlook report

• PRA takes action against the former Chief Executive Officer of Wyelands Bank Plc for multiple breaches of the PRA’s Conduct Rules

• The weekend starts here − speech by Dave Ramsden, Deputy Governor, Markets and Banking at the Bank of England

Consumer Duty; the next steps

The gift that keeps on giving!  The FCA has published the webinar it broadcast on 6th December, together with a transcript.  Here are hotlinks to the webinar and the  transcript. 

Four anti-money laundering changes to watch out for in 2024

Financial crime will continue to be a focus for the FCA this year.  According to its latest annual report, 613 financial crime supervision cases were opened in 2022/23 – an increase of 65% from 2021/22 and 10% from 2020/21.

Money Marketing has published a useful summary, the changes relate to inception of the Economic Crime and Corporate Transparency Act 2023 (ECCTA).

1.    Proactive intelligence gathering

Financial services firms, and individuals within them, are the eyes and ears of law enforcement authorities.  They bear a substantial burden to disclose to the National Crime Agency (NCA) information about possible money laundering by their customers and others with whom they come into contact.

2.    Crypto crackdown

There has been much commentary about the potential for crypto assets to be used as a vehicle for money laundering.  The law is now catching up with the technology in this area.

3.    Strengthening of Companies House

Alongside additional requirements increasing the amounts of information required to be provided to Companies House (CH), the ECCT Act has also bolstered CH’s investigation and enforcement abilities, giving it the power to more effectively cross-check data with other public and private sector bodies. 

4.    Technological challenges

Technology will continue to be at the forefront of AML compliance efforts. In particular, artificial intelligence (AI) and blockchain are likely to assume even greater significance. Leveraging the power of AI to sift through vast volumes of data, detect anomalies and generate real-time insights is an enticing prospect.

UK high net worth individual and sophisticated investor exemptions updated

Copied from a Corporate Notes blog from Herbert Smith Freehills, no hotlink.

With effect from 31 January 2024, the government has made new regulations to update the exemptions in the Financial Promotions Order (2005) (the FPO) relating to high-net-worth individuals and sophisticated investors.

This forms part of a wider initiative by HM Treasury and the FCA to reform and update the UK’s financial promotions regime under section 21 of the FSMA 2000, and follows an earlier consultation and response published by HM Treasury.

The exemptions under the FPO enable unauthorised firms to issue financial promotions to high-net-worth individuals and sophisticated investors without the regulatory protections afforded by the financial promotions regime.

The new regulations:

• increase the financial thresholds to be eligible for the high-net-worth individual exemption to income of at least £170,000 (up from £100,000) in the last financial year, or net assets of at least £430,000 (up from £250,000) throughout the last financial year;

• amend the eligibility criteria for the self-certified sophisticated investor exemption; and

• update the content and format of the high net worth individual and self-certified sophisticated investor statements.

Full details of the restrictions can be found in COBS 4.12B.

Clyde & Co fined £500,000 after admitting due diligence failure

Top-50 law firm Clyde & Co has been fined £500,000 after admitting failing to carry out due diligence on a corporate client for more than four years.

The firm’s former partner Edward Henry Mills-Webb was also fined £11,900 by the Solicitors Disciplinary Tribunal after admitting that he ‘materially contributed’ to the failure to check more than a dozen transactions as required by anti-money laundering regulations.  There was no evidence that the client or its principals were involved in money laundering or financial crime.

It is the second sanction levied on Clyde & Co in the past seven years.  The international firm was previously fined £50,000 and three partners £10,000 each for accounting failures and breaches of AML rules.  The report in the Law Society Gazette has more details.

The Plenitude Regulatory Intelligence team has published its 2023 recap and 2024 outlook report

Running to 33 pages, the report provides an overview of changes to AML/CTF regimes across a number of jurisdictions.  In its end-of-year review, Plenitude’s Regulatory Intelligence team provides a comprehensive overview of the regulatory developments in 2023 and anticipates potential changes on the horizon for 2024.  This paper explores the key amendments and implementations across four global financial hubs: the UK, EU, Hong Kong and Singapore.  These jurisdictions have been at the forefront of regulatory innovation and will continue to lead development during 2024.

PRA takes action against the former Chief Executive Officer of Wyelands Bank Plc for multiple breaches of the PRA’s Conduct Rules

The PRA has fined Mr Iain Mark Hunter, the former CEO of Wyelands Bank Plc, £118,808 for breaching three PRA Conduct Rules between 7 March 2016 and 28 May 2020.  The PRA’s press release gives the reasons for the fine and shows similarities in the approaches of the FCA and PRA.  There are links to the PRA Final Notice to Iain Mark Hunter and the PRA Final Notice to Wyelands Bank plc in the notes to editors at the end of the press release and also a link to the PRA’s approach to SMCR which is a useful contrast to the FCA’s approach.

The weekend starts here − speech by Dave Ramsden, Deputy Governor, Markets and Banking at the Bank of England

In a speech given on 15th December 2023, Dave Ramsden looks back on a significant year for the Bank of England as the UK’s resolution authority, including the failures of Silicon Valley Bank and Credit Suisse in March, and reflects on the importance of operational readiness, enhancing readiness and ensuring resolvability

Ian Ashleigh