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Financial services enforcement trends 2022

2021 was a year of contrasts when it came to the FCA and PRA’s enforcement work.

On the one hand, the rate at which the FCA has commenced new investigations has slowed significantly, and both regulators have experienced challenges in progressing their existing portfolio of investigations, in large part due to the competing demands on their time and resourcing challenges precipitated by the pandemic. We therefore saw relative few published outcomes in respect of significant cases.

On the other hand, however, the investigations that have led to public outcomes and our own knowledge of the regulators’ portfolio of ongoing cases provides some clear insights into the key priorities of the regulators.

  • For the FCA, AML/financial crime and consumer protection saw a significant amount of regulatory attention both in terms of enforcement and on the policy side.
  • For the PRA, transparent and accurate regulatory reporting and effective governance and risk management systems and controls appear to be the principal areas of current focus (evidenced by the penalties imposed at the end of last year on Standard Chartered Bank in relation to its liquidity reporting and Metro Bank in relation to its capital reporting).
  • The PRA is also conducting a larger number of investigations independently of the FCA.

Changing supervisory and enforcement practices

Elsewhere, whilst some of the predicted enforcement cases arising out of the pandemic have yet to materialise, technological change, innovation and emerging products continue to test the FCA’s stated desire to be more nimble in tackling consumer harm before it crystalises. Changes to the FCA’s decision-making processes are intended to help support the FCA in becoming a more agile regulator, there are already signs that during 2022 the FCA will look to become more assertive in the way in which it exercises its supervisory intervention powers.

A focus on NFM and D&I

Finally, the regulators’ continued focus on non-financial misconduct (NFM) and, more broadly, the role that diversity and inclusion (D&I) plays in developing a healthy organisational culture will continue to feature indication of the likely future direction of enforcement in the culture and individual conduct space.

Our insights in depth

Here we highlight the most important enforcement developments in 2021, together with the key areas we believe will impact the nature and direction of enforcement activity by the UK financial regulators during 2022.

Listen as we count down our top five trends for 2022

Topics covered in our Enforcement Trends Report

Click on each of the topics to find out more

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Consumer protection

Horizon 

The FCA remains committed to identifying and tackling instances of consumer harm, rooting out systemic risk within the industry and securing remediation where things go wrong. Much of the FCA's work here is aimed at restoring trust in the regulated sector and requiring firms to take greater steps to equip clients with necessary information and support.

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Conduct, culture and individual accountability

Consumer Harm

The regulators view conduct and culture improvements as fundamental to restoring and maintaining public trust in regulated firms. FCA supervisors are increasingly demanding evidence from firms that they are meeting the regulators' objectives for improvement in conduct and culture.

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Operational resilience and cybersecurity

Governance

The regulators remain focused on robust cybersecurity and operational resilience systems and controls. The standards expected of firms in this area are only increasing.

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AML and financial crime

Horizon

This remains one of the FCA's top supervisory and enforcement priorities, with several high-profile cases in 2021. Alongside further enforcement outcomes in 2022, we expect more assertive supervisory interventions including to address new areas of money-laundering risk emerging from disruptive technologies.

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Market conduct

Prudential

Whilst 2021 was a quiet year for market conduct enforcement actions, ongoing hybrid working is prompting policy and supervisory developments, and there remains significant scrutiny of authorised firms and issuers including with respect to continuous disclosure and personal account dealing.

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Practice, policy and procedure

Sustainable Finance

Following a rationalisation of the regulators' caseloads during lockdowns, the regulators will now strive to pick up the pace. But they face headwinds including capacity constraints and growing data volumes, alongside the need to address criticisms from the Upper Tribunal in 2021. Alongside enforcement action, the FCA in particular may increasingly exercise its supervisory powers more rapidly and assertively to address rapidly crystallising risks of consumer harm.

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Explore our Year to Come 2022 and Year in Review 2021 series across 20+ jurisdictions and a number of legal topics.

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