The Financial Conduct Authority is promising to root out weak anti-money laundering controls in UK firms this year.
The pledge is a cornerstone of the financial regulator’s new 2016/17 business plan, published as the leak of documents from a Panamanian law firm exposes the financial dealings of world leaders, celebrities and criminals, revealing the use of offshore companies for money laundering as well as tax avoidance.
The FCA is committed to making the UK financial system a hostile sector for money launderers, by using its enforcement powers when it finds firms with weaknesses in their controls. It will also refer cases to other law enforcement agencies, and promises to support and encourage whistleblowers.
“The UK financial system is a major global hub which attracts investment and activity from across the world,” says the FCA’s plan. “However, this can also attract criminals and terrorist organisations seeking to hide the proceeds of crime among the huge volumes of legitimate business.
“It is imperative that the UK financial system has appropriate safeguards to prevent financial crime.”
Last year the FCA fined Barclays Bank £72m for failing to minimise the risk that it may be used to facilitate financial crime.
The regulator also has firms’ culture and governance in its sights this year as it continues to challenge poor conduct. It wants companies to be proactive in identifying – and addressing – the risks their strategies, business models and cultures present to customers.
“Culture remains a key driver of significant risks in every sector and the root cause of high-profile and significant failings,” adds the plan. “It impacts on individual behaviours which in turn affect day-to-day decisions and practices in the firms we regulate. Culture is therefore both a driver, and potential mitigator, of conduct risk.
“We will hold management to account where cultural issues lead to internal controls that fail to promote and support the right outcomes for consumers and the market.”
The other five priorities for the FCA in 2016/17 are pensions, wholesale financial markets, advice, innovation and technology – especially where weaknesses in systems may expose firms to the increasing risk of cyber-attacks - and treatment of existing customers, whom the regulator wants to see firms engage with effectively.