FCA’s Dual Role: Regulator and Law Enforcement
During a recent event, the Financial Conduct Authority (FCA)’s joint executive director of enforcement and market oversight, Steve Smart, stated that in combating financial crime, the FCA is a dual actor.
“We are to some extent, try to figure out the ways criminals are going to misuse these new technologies or work with the firms we oversee in the prevention of such acts. Among them- using artificial intelligence and deep fakes- is also our step”.
Registration to Combat Financial Crime
One of the right steps is the authorization of banks and funds that the FCA has taken as the regulators of the financial industry. Smart was firm on the fact that this process can become a way to check that standards are not compromised.
“In the process of employer check, we are satisfied that the new system is quite efficient with the use of the business model and IT, thereby deeming employers compliant before approval can happen. This is very vital when it comes down to the fact that the larger systems would not be harmed”, he continued.
Steve said that in the past, there were some issues with the pigeonhole processes making the processes at FCA look sluggish. However, he noted that only 14% of cryptocurrency registrations are approved for transferring and processing on the FCA Platform. Another 86% of registrations are withdrawn, rejected, or refused due to insufficient compliance with AML standards.
Importance of Data Sharing Initiatives
Smart equally drew attention to the significance of data sharing as a primary cooperation mean to avert fraud and encouraged companies, multi-industry partners as well to join in.
“It is not always possible for an individual to identify the regulation or the law that has been violated”, he said. “We cannot act as detectives alone”, criminals will always find the weakest firms and areas to exploit, so sharing data and intelligence is the main tool at our disposal to strengthen our defenses”.
Focus on Intelligence
In order to be proactive in this work, Smart assured that the FCA is “intelligence-led organization” and that “we have to come together as various organizations to pull off this work”. The FCA collects a very large load of data that includes more than 7 billion reports of transactions from over 1,300 UK firms and more than 500 million order book records on a daily basis. This data is reviewed for the purpose of investigating regulatory breaches, detecting insider trading, and trading market abuse.
Recent Regulatory Updates
Mr. Smart, addressing the FCA’s punishing of the guilty, noted the broad consultation of stakeholders and was particularly gratified with the responses given. The FCA commented on the results and assured that it would assess the feedback and participate in the discussions with the main industry players to decide the correct action.
In a statement from last year, FCA decided to establish rules such as cryptofirms provide to register with the financial regulator and to get their marketing materials approved by an FCA-authorized firm. For example, exchanges could list any potential risks linked to crypto investment to enable customers know what they are getting into.
Continuous monitoring is required for compliance to the new rule associated with professional certification. The FCA is clear in its warning that non-compliance could lead to the launch of criminal proceedings, among the domestic and overseas exchanges that operate in the UK, and the punishments might be unlimited fines and two years in prison. Thus, some of the leading cryptocurrency exchanges, Coinbase, Revolut, and Binance have redesigned their apps for the web apps version and had them adapted to the new regulations that have been enacted.
