Enforcement watch: FCA looks to the US as part of its growth agenda

In a recent speech in New York, the FCA's joint executive director of enforcement Therese Chambers made the most of the opportunity to speak about the FCA's strong relationship with US agencies and the mutual benefits of cooperation. 

Scope for collaboration

Whilst the highest profile example of US/UK regulator interaction remains the unprecedented LIBOR/FX fines over ten years ago, Therese Chambers talked about the importance of an ongoing working relationship with US partners from both an enforcement and supervisory perspective. Examples of areas where cross-border collaboration is needed in an enforcement context include the pursuit of perpetrators of online fraud and scams. From a supervisory perspective, the FCA and US agencies need to work together in the context of proactive anti-money laundering monitoring (including through the use of digital tools). 

It was emphasised that high standards of regulation and an effective enforcement are crucial to ensuring London remains a successful international financial centre. Whilst not spelt out by Therese Chambers in her speech, it could be inferred that these factors are considered to be necessary not only to maintain this position but as a prerequisite for growth.

FCA announces US presence

The speech coincided with an announcement in the same week that the FCA has placed a representative at the British Embassy in Washington D.C., with a mandate to advance UK-US financial services policy and regulatory cooperation and provide support to US financial firms seeking to navigate UK regulation. If effective, this step could help smooth the path for US firms to establish a London footprint as part of the FCA's growth agenda (although query whether the US presence will need to be scaled up considerably in order to have a perceptible impact).

What are the FCA's priority areas?

On the basis that US institutions with a London footprint need to be alive to the FCA's priorities, the speech included an overview of the FCA's new five-year strategy (for more detail, see our summary), and for the benefit of the US audience explained the FCA's intention to increase the deterrent effect of enforcement but doing fewer investigations faster with a focus on:

• Keeping dirty money out of the financial ecosystem: this remains a "huge priority" for the FCA, including the adequacy of KYC/AML controls and ongoing transaction monitoring.  The FCA has an active watching brief on the development of smart fintech solutions (including the potential use of digital ID to support enhanced verification methods) but in the meantime will continue to spend resource policing this area
• Taking swift actions where regulated firms are being used as vehicles for fraud: this is considered to be a "major priority" which is currently pursued by the FCA through a combination of criminal prosecutions, redress programmes and closing down firms where the FCA forms the view these are vehicles of fraud. For more detail on the FCA approach see our summary of an FCA speech on the FCA approach to tackling fraud.
• Keeping markets clean: the FCA is alive to the threat posed by organised crime groups infiltrating global markets and continues to pursue a steady stream of cases in this area across the equity, fixed income, currencies or commodities markets.  There is an ongoing expectation that firms remain vigilant in conducting transaction monitoring and analysis (where warranted)
• Developing a safe crypto regime to protect consumers: the FCA plans to engage with government, industry, consumers and regulatory partners with a view to developing a safe, competitive and sustainable crypto sector.  Regulation is currently limited to anti-money laundering and financial promotion requirements.  As of February of this year, only 50 out of 351 firms met the FCA's standards to be registered.

If you would like to discuss the issues discussed in the FCA's speech in more detail, or any related issues your organisation is facing, please get in touch with Sonya Zywko.