Every January the FCA announces the fines total for the previous year. The 2020 totals were not quite as high as the 2019 figure, but it has still issued fines of more than £500m in those two years – and that takes into account early settlement discounts.
Included in the 2020 figure was a fine for one firm of £48m and another for £26m. Of course, these amounts do not include the cost to firms of responding to FCA investigations (which often exceeds £100k), the cost of remediation (in terms of compensation and the cost of administering the remediation) and the cost of the damage to a firm’s brand and reputation.
While firms might historically have been tempted to think that FCA fines were ‘just a cost of doing business’, with such eyewatering sizes of penalties, and the fact they are getting bigger, must result in a re-assessment. That approach can surely no longer be valid or even contemplated by any reasonable businesses.
The FCA fines cover a wide range of non-compliance areas. In 2020 breaches of rules occurred in respect of Conduct of Authorised Persons (CAPR), consumer credit (CONC), client assets and money (CASS), market abuse, fitness and propriety and unfair treatment of customers. In addition, almost unbelievably, 9 of the 11 Principles for Business were breached, leaving only 2 that were not cited in the final notices. Clearly many businesses are just not taking regulation seriously enough.
We are not surprised – too often we see lip service being paid to compliance where firms review and audit the smallest number of files/transactions they can get away with. That must change; firms need to measure whatever volume it takes to ensure cultures change and they become focussed on positive consumer outcomes. Once compliance is embedded into business culture, it can ultimately contribute to profits, rather than being seen as a cost centre.
Governance and oversight are our bread and butter; we have carried out numerous projects and reviews for a wide range of financial services firms. If you would like to find out more about how we can help you through the regulatory challenges of 2021, give us a call.