In recent weeks, the FCA has issued two significant enforcement actions that should serve as a wake-up call to the financial services sector.
Monzo Bank was fined £21 million for failings in its financial crime controls; and Barclays was hit with a £42 million penalty for similar shortcomings in managing financial crime risks.
These are not small firms struggling with resources. They are well-established and heavily regulated institutions – and yet, their systems and processes fell short of the FCA’s expectations.
Why do these failures happen?
Even with recent developments in technology and compliance frameworks, many firms still underestimate the complexity of financial crime risks.
Here are some of the most common issues:
- Customer due diligence that doesn’t go far enough – especially when it comes to properly identifying and assessing high-risk clients.
- Weak transaction monitoring – either failing to pick up suspicious activity or generating so many alerts that they become unmanageable.
- Ineffective suspicious activity reporting – delays or failures in submitting suspicious activity reports can lead to serious regulatory breaches.
- Poor governance and oversight – often because compliance teams are not given the tools or authority to enforce necessary controls.
In many cases, these weaknesses aren’t deliberate wrongdoings, but stem from a lack of robust systems and clear accountability.
The cost of getting it wrong
The financial penalties are significant, as we’ve seen with Monzo and Barclays, but the reputational damage can be even greater. Firms can lose consumer trust, face increased scrutiny from the FCA, and face the operational costs of the remediation required, and this all takes a toll.
How to avoid becoming the next headline
The good news is these risks are manageable if you take a proactive approach.
Key steps include:
- Regular risk assessments – they should reflect the true nature of your business and client base, not just tick boxes.
- Review early and often – don’t wait for the FCA to find weaknesses; identify them internally first by internal reviews and audits.
- Test your monitoring tools regularly – make sure they’re working as they should and ensure that flagged alerts are investigated promptly.
- Strong governance – clear roles, defined responsibilities and escalation routes make all the difference.
- Ongoing training – financial crime is evolving, and your team needs to be one step ahead.
How we can help
We work with financial services businesses to build and strengthen their financial crime frameworks. Our services include:
- Internal audits and reviews
- Preparing for FCA visits and reviews
- Conduct corporate governance frameworks and reviews.
- Training for teams and senior management
The recent fines are a reminder that even the biggest players aren’t immune. If you haven’t reviewed your financial crime controls recently, now is the time.
Get in touch today to discuss how we can help you stay compliant and protect your business.
