This post was first published by Thompson Reuters Regulatory Information Bureau on March 28, 2023.
The UK Financial Conduct Authority (FCA) is entering the final year of its 2022-2025 Strategy, which is characterized by efforts to become more innovative, proactive and adaptable. The 2024/25 Business Plan outlines how the regulator intends to deliver on its commitments over the next 12 months.
What is a business plan and how does it relate to your 2022-2025 strategy?
The FCA launched its current three-year strategy in April 2022, outlining its expectations for regulated companies and the outcomes it aims to achieve. This strategy reflects the FCA's continued quest to become a more confident, data-driven regulator. The FCA therefore has a responsibility to demonstrate over the next 12 months how it will achieve the targets it set three years ago.
assignment
The FCA said the economic and geopolitical environment was less volatile than in previous years, but it nevertheless identified several risk areas that required particular attention.
Persistent inflation and rising interest rates pose the most significant threat to the stability of consumers, businesses and the UK's place in the global economy. General geopolitical risks remain high and the FCA must be prepared to deal with significant disruption.
The 2024/2025 Business Plan includes a larger budget of £755m, reflecting a 10.7% increase in annual funding needs. This is higher than the 8.5% rise in 2023/24 and the 4.3% increase in 2022/23. Further details are expected to be provided in the FCA's annual fee rate consultation paper, due in April 2024.
Focus areas
The FCA has highlighted consumer protection and market integrity as key areas of focus for next year. Investing in data analytics and technology is a core pillar supporting these priorities.
Promoting effective competition is also an area of focus for the FCA, both for UK-based consumers and for the UK itself in international markets. Driving these goals forward requires significant resources and FCA continues to grow its workforce with the aim of reaching over 5,000 staff by the end of March 2024. 'Operational resilience' was also flagged to ensure the FCA's ability to respond effectively to unexpected events. event.
promise
This business plan addresses all 13 commitments that FCA has made in its strategy. Initiatives were grouped into three themes: reducing and preventing serious harm, setting and testing higher standards, and promoting competition and positive change. The FCA said this year it would pay close attention to reducing financial crime, prioritizing the interests of consumers and strengthening the UK's competitiveness in wholesale markets.
Almost half of the 13 commitments relate to harm reduction, particularly in terms of financial crime and market abuse.
Financial crime mitigation
The FCA has identified three outcomes it aims to achieve: curbing the rise in investment fraud and push payment fraud, reducing money laundering by regulated firms, and improving the effectiveness of specialist regulators' oversight.
The plan references two UK financial crime strategy documents published in 2023: the government's Economic Crime Plan 2 2023-2026 and its fraud strategy. Both newspapers make a case for the government's efforts to combat fraud in the UK, with the latter specifically mentioning push payment fraud.
The business plan's references to money laundering and specialized supervisory bodies may foreshadow future reforms to the UK's anti-money laundering framework. In June 2023, the Ministry of Finance will consult on AML reform, including the potential consolidation of specialized supervisory departments, and plans to publish a decision and implementation considerations by the second quarter of 2024.
The FCA has supported the replacement of professional services supervisors in a single body.
The economic crime plan includes a milestone to “develop a strategy for how to tackle financial crime in relation to environmental, social and governance issues”, which the FCA plans to act on in the fourth quarter of 2024. . ESG initiatives outlined in the business plan include the integration of sustainability labels. and anti-greenwashing rules.
This will be of great interest to companies that need to disclose their ESG efforts. The FCA conducted a consultation on guidance on anti-greenwashing rules from November 2023 to January 2024. The regulation states that all sustainability claims that certified companies make about their products must be fair, clear and not misleading. Final guidance will be published soon.
market abuse
The business plan also focuses on market abuse across asset classes. Such abuse occurs when a trader attempts to influence the value of a similar or related asset in another venue. Sophisticated and difficult to identify.
Cryptoassets remain a key focus for the FCA. In addition to working on the promotion of crypto-asset companies and AML supervision, the FCA will introduce a proportionate market abuse regime for crypto-assets.
In October 2023, the Treasury announced that the regime reflects elements of the Market Abuse Regulation for Financial Instruments and that crypto assets that are admitted (or requested to be accepted) for trading on UK exchanges are The law applies to all those who abuse the market.
Active supervision and enforcement actions
As a plan announced in the final year of a three-year strategy, the business plan focuses on work in progress and completed work rather than future initiatives. Companies are likely to be subject to active supervision and enforcement this year in the FCA's stated focus areas, particularly money laundering. Companies are advised to ensure that their systems and controls are strengthened accordingly in advance of a potential regulatory investigation.
This blog post was co-authored with paralegal Katy O'Connor.
