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The UK financial watchdog intensified its attempts to clean up the system by bringing a record number of criminal charges against individuals and doubling the number of institutions that it stripped of regulatory approval.
The step-up in the Financial Conduct Authority’s enforcement activity was accompanied by a surge in both staff numbers and operating costs. But the amount it collected in fines fell sharply to £35.3mn in the year to April, down from £212.6mn in the previous year and its lowest for over a decade.
Nikhil Rathi, the regulator’s chief executive, said it was aiming to balance its crackdown on financial wrongdoing with encouraging innovation and growth.
“If we want the UK to maintain its international competitive edge, then we need to be bold and accept that we will not, nor should we try to, stop every failure,” he said in the FCA’s annual report, published on Thursday.
His comments came a year after the government gave the FCA a new secondary objective to facilitate the UK’s economic growth and international competitiveness in a move some fear risks impinging on its independence and fostering a lighter-touch approach to regulation.
The regulator took a tough approach on approving the registration of crypto asset companies, rejecting 87 per cent of the applications it received from such firms seeking clearance for their money laundering defences. It also issued 450 consumer alerts against crypto asset promoters only three months after tightening rules against misleading marketing.
Its chair Ashley Alder said it was “conscious of the need to achieve a balance between the compliance burden on different types and sizes of firm and an FCA which is appropriately informed, assertive and agile to tackle potential and actual instances of harm”.
The FCA charged 21 people with financial crime offences in the past year, its highest number on record. It also increased the number of successful prosecutions to 11, up from only one in the previous year.
Overall, the regulator said it increased the number of cases for financial crimes it opened in the year to April to 837, up from 613 a year earlier. However, the number of fraud cases it opened almost halved from 2,013 to 1,039.
Natalie Sherborn, white-collar crime partner at law firm Withers, said that while some of the FCA’s statistics showed an increase in activity, “to many, these numbers will still seem pitifully low”. She added that “there is clearly still much work to be done”.
The regulator stripped 1,261 firms of their authorisations in the 12 months to April, double the previous year’s level. “We want consumer and market participants to be confident that firms which fail to meet our minimum conditions are identified and cancelled quickly,” it said.
The FCA embarked on a recruitment surge last year in response to growing demands on its resources and the expansion of its mandate. It hired nearly 1,000 more people, increasing its total workforce by 17.5 per cent to almost 5,000.
In an encouraging sign for an institution that has long been plagued by poor morale, the FCA said staff turnover was 9.9 per cent last year, down from 17.5 per cent.
Its hiring surge, as well as increased investment in technology and a 6.8 per cent average pay rise for staff, pushed up its total costs by £92mn to £761.7mn. This helped to produce a total deficit of £44.8mn, which was down slightly from £52.1mn a year earlier.
Rathi, who had a 4.1 per cent pay rise to £530,000 last year, said he was “continuing to make great strides to transform the FCA”.
https://www.ft.com/content/4b5bf285-ee34-4f43-be1e-1db9a7f5b1b8
