FCA Fines Shine Light on Training Needs
18th December 2019
After a relatively quiet year in 2018, the FCA has already issued a staggering £389m in fines.
These include the second-largest fine of £102m against Standard Chartered for money-laundering, £45m for the Bank of Scotland for failing to be open and cooperative, and £34m for Goldman Sachs for poor reporting practices.
One of the most common threads in the issues that produced these immense fines is a lack of employee awareness and a culture of wilful blindness. Rather than recognise problems and raise the alarm, too many individuals were focused on preserving their power, profiting personally, and sweeping irregular, improper and illegal acts under the carpet.
Awareness of the FCA rules is undoubtedly a core part of improving compliance. The primary mission of the FCA is clearly stated.
The FCA exists to:
- Enhance market integrity
- Promote competition and maintain fairness
- Protect consumers from predatory and unfair practices
The FCA’s mission seems clear enough.
So why do so many companies fall foul of their rules?
What can we learn from some of the major fines already issued in 2019?
Prudential – fined £23.9m
Prudential Assurance Company was fined for failing to provide customers with clear information. Prudential did not dispute the FCA’s findings that they had failed to treat some customers fairly. The problem stemmed from conduct between 2008 and 2017, involving them failing to inform customers that they had the right to shop around.
Catherine McKinnell MP, interim chair of the Treasury Committee, said: “This is yet another example of incentives in the financial services sector leading to a poor outcome for consumers. This toxic culture must be wiped out. Competition benefits consumers; Prudential’s actions have undermined this.”
The remarkable thing about the Prudential case is that the non-compliant behaviours were routine for 9 years. How did this continue for such a long time? Why did Prudential staff not question the practice – or raise the alarm?
Bank of Scotland – fined £45.5m
Bank of Scotland was fined for failing to disclose information about a £245m fraud scandal at their Reading branch. The fraud involved a rogue bank manager diverting struggling businesses to a turnaround consultancy, which was purely interested in overloading the businesses with unmanageable debts and fees. Six people were jailed for their part in the scam.
The FCA fine reflects the seriousness of their failure to fully disclose information relevant to the case. The bank was first aware of irregularities relating to their impaired assets team in 2007, but they failed to notify regulators until 2009.
Were bank employees aware of their duty to disclose their concerns? The bank, now part of Lloyds Banking Group, has apologised for the incident and committed to putting things right.
Standard Chartered – fined £1.1bn
Poor anti-money laundering (AML) controls produced this whopping fine for Standard Chartered.
The FCA press release includes shocking details of the breach, including examples of money laundering risks:
- Opening an account with 3 million UAE dirham (worth £500,00) in cash in a suitcase, with little evidence of the money’s origins.
- Failing to collect information on a customer exporting a commercial product with a potential military application.
- Failing to review due diligence on a customer despite multiple red flags.
FCA compliance training from Marshalls
The three cases outlined above demonstrate the variety of issues that can attract the attention of the FCA. And these are just a fraction of the judgements and fines issued by the FCA each year.
Marshall E-Learning has a selection of bespoke courses to help your team understand their FCA obligations:
To find out further information about our courses and what we do, please get in contact here.