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Purpose: The purpose of this paper is twofold. Firstly, it highlights areas of disconnect between how the financial services sector in the UK approaches the requirement to evidence source of wealth when conducting customer due diligence; the requirements of the UK's laws and regulations in relation to evidence source of wealth; and the expectations of the Financial Conduct Authority (FCA) in this regard. It then proposes an alternative approach to evidencing source of wealth. Design/methodology/approach: Semi-structured interviews have been carried out among compliance professionals in UK financial services. Findings: This paper provides rare insight into the anti-money laundering arrangements of UK banks, an area that has not yet been widely researched in the academic literature. It highlights a lack of legal certainty in the UK's laws and regulation around anti-money laundering and argues that the expectations of the FCA exceed both the letter and the spirit of the laws. It suggests that mixed messages disseminated by the FCA have incentivised banks to shift their focus from financial crime risk (i.e. preventing money laundering and terrorist financing, etc.) towards regulatory risk (i.e. the risk of falling foul of regulatory expectations) and proposes a change to the law and regulatory guidance to enhance the level of legal certainty needed for the law to be effective. Practical implications: The paper makes suggestions for a more practical and risk-based approach to anti-money laundering compliance and for a much-needed change in the law. Originality/value: It provides unique insight into the due diligence challenges of financial services firms and argues for the FCA to propagate a more risk-based approach to enhanced due diligence. [ABSTRACT FROM AUTHOR]

The FCA's Approach The FCA reviewed each of the retail financial services markets in turn, considering the factual background, particularly Big Tech's entry in the market to date. Keywords: Financial Conduct Authority; FCA; discussion paper; Big Tech; financial services EN Financial Conduct Authority FCA discussion paper Big Tech financial services 59 63 5 04/04/23 20230101 NES 230101 In October 2022, the Financial Conduct Authority (FCA) issued a discussion paper on the potential competition impacts of Big Tech entry and expansion in retail financial services (the Discussion Paper). Part II describes the purpose of the Discussion Paper and Big Tech's activities in the financial services markets in the UK to date, and summarises the FCA's conclusions. [Extracted from the article]

After the 2007/2008 financial crisis, the UK government decided that a change in regulation was required to amend the poor control of financial markets. The Financial Services Act 2012 was developed as a result in order to give more control and authority to the regulators of financial markets. Thus, the Financial Conduct Authority (FCA) succeeded the Financial Services Authority (FSA). An area requiring an improvement in regulation was insider trading. Our study examines the effectiveness of the FCA in its duty of regulating insider trading through utilising the event study methodology to assess abnormal returns in the run‐up to the first announcement of mergers. Samples of abnormal returns are examined on periods, under regulation either by the FSA or by the FCA. Practically, stock price data on the London Stock Exchange from 2008 to 2012 and from 2015 to 2019 are investigated. The results from this study determine that abnormal returns are reduced after the implementation of the Financial Services Act 2012; prices are also found to be noisier in the period before the 2012 Act. Insignificant abnormal returns are found in the run‐up to the first announcement of mergers in the 2015–2019 period. This concludes that the FCA is efficient in regulating insider trading. [ABSTRACT FROM AUTHOR]

In this article, we look at the contested role of in-house lawyers in regulated organisations in the financial sector. A recent Financial Conduct Authority consultation on whether to designate the head of legal of banks, insurance companies and other financial firms as 'Senior Managers' and the decision which flowed from it, reflected a flawed view of lawyers as a neutral technocracy of mere legal technicians; we show how the FCA's decision is potentially damaging to the public interest and failed to take into account that in-house lawyers are often important decision-makers and influencers within their organisations. We put the case for an alternative view; that in-house lawyers are professionals, with agency that requires them to act in accordance with ethical norms and means they should be made more accountable for their conduct. [ABSTRACT FROM AUTHOR]

With the rise of technology solutions and their application in the financial markets (also referred to as FinTech), several regulated firms, ranging from small to institutional players, are increasingly availing of third parties (both regulated and unregulated) across the globe to perform a process, a service or an activity that would otherwise be undertaken by such regulated firms. Effectively, the decision to avail of such arrangement, labelled as outsourcing, can be the result of multiple business considerations, including (i) reliance on third parties due to their more efficient and cost-effective systems, (ii) scalability, (iii) lack or limited internal resources and/or in-house capabilities, but also (iv) intragroup allocation of functions and (v) agility and flexibility. The financial industry, however, is facing an increasing scrutiny over outsourcing arrangements, especially in respect of information technology (IT)-related outsourcing, by regulators across the European Union (EU) and the United Kingdom. The key regulatory concerns range from stakeholder protection, operational resilience to business continuity. To ensure that such concerns are duly addressed by regulated entities, EU supervisory authorities and the Financial Conduct Authority (FCA) intervened with binding guidelines on outsourcing and a strengthened regulatory framework applicable to outsourcing, covering the pre-outsourcing phase and extending from day-to-day monitoring. This paper aims to provide a pragmatic overview on certain best practices designed to ensure effective monitoring of outsourced functions and sustainable operational resilience. A first section shall focus on the notion of outsourcing and shall identify the main regulatory framework(s) affected by outsourcing rules. The following section will focus on the impact of outsourcing in the investment services industry, with a particular emphasis on asset managers, credit and financial institutions and investment service providers, without looking at the insurance sector. A third section will provide a five-step guidance on building an effective outsourcing monitoring model with a particular focus on small-medium enterprises, while the following section will focus on exit strategies. Before drawing the conclusions of the analysis carried out earlier, a final section will identify what the authors believe being the ultimate goal of ensuring effective third-party outsourcing monitoring, namely the creation of a sustainable control environment designed to deliver operational resilience in the long term. [ABSTRACT FROM AUTHOR]

Purpose: The purpose of this paper is two-fold. First, it highlights areas of disconnect between how the financial services sector in the UK approaches the management of politically exposed persons (PEPs) risk; the requirements of the UK's laws and regulations in relation to PEPs; and the expectations of the Financial Conduct Authority (FCA) in this regard. It then proposes an alternative approach to the risk-management of PEPs. Design/methodology/approach: Semi-structured interviews have been carried out among compliance professionals in UK financial services. Findings: This paper provides rare insight into the anti-money laundering (AML) arrangements of UK banks, an area that has not yet been widely researched in the academic literature. It argues that the expectations of the FCA exceed both the letter and the spirit of the UK's laws and regulation around AML by emphasising an administrative approach over a qualitative/analytical approach to risk-management. It further suggests that mixed messages disseminated by the FCA have incentivised banks to shift their focus from financial crime risk (i.e. preventing money laundering and terrorist financing, etc.) towards regulatory risk (i.e. the risk of falling foul of regulatory expectations). Practical implications: The paper makes suggestions for a more relationship-centric approach to PEP risk-management. Originality/value: It provides unique insight into PEP risk-management in financial services, and argues for the FCA to propagate a more relationship-centric approach to PEP risk-management. [ABSTRACT FROM AUTHOR]

Tackling non-financial misconduct is an increasing focus for financial regulators internationally. This legal analysis examines the statement action by the UK Financial Conduct Authority (FCA) in November 2020 to ban three individuals from working in financial services for non-financial misconduct. The FCA's broad approach is likely to present difficulties to defend actions. Equally, the cases reveal considerations for attractive counter-arguments. Both sides are left with room for manoeuvre. [ABSTRACT FROM AUTHOR]

When the newly re-constituted UK financial services regulator-the Financial Conduct Authority-was launched in 2013, it promised to adopt a new approach to its “consumer protection” objectives. This shift included articulating a new conception of consumer vulnerability, beyond narrow, individualistic, conceptions of vulnerability based on (limited) financial capability, towards a broader conception which takes account of the connection between individual circumstances, situations, and market factors in causing or exacerbating manifestations of consumer vulnerability. Drawing on new empirical research with later-life financial services stakeholders and consumers, this article examines the extent to which equity release stakeholder perceptions of consumer vulnerability align to this new regulatory philosophy, and to the realities of consumer experiences. Our findings indicate that, in contrast to the FCA’s new, broader understanding of consumer vulnerability, the stakeholders in our study tended to understand vulnerability through a narrower lens, focusing predominantly on “information vulnerability,” or on whether or not the consumer “knows what they are doing.” This conception supports the assumption that providing financial advice is sufficient intervention to ensure good consumer outcomes. This assumption is also at odds with our earlier consumer study findings, which revealed a much wider set of vulnerabilities amongst equity release consumers. We reflect on the implications of these findings for the development of the later-life financial services industry, in ways that can more appropriately serve the needs of this consumer population. [ABSTRACT FROM AUTHOR]

The UK's access to justice issues means that individual and small and medium-sized business (SME) customers struggle to obtain redress for banking sector misconduct through litigation. Regulatory protections promoted by the Financial Conduct Authority (FCA) are effective for straightforward complaints but not for more complex ones. The payment protection insurance, interest rate hedging product and Royal Bank of Scotland's Global Restructuring Group scandals evidence this. A proposal to establish specialist financial services tribunals to determine consumer claims against banks can provide a solution to this problem. [ABSTRACT FROM AUTHOR]

The UK's Financial Conduct Authority (FCA) has been leading the way in nurturing and regulating FinTech. Its "Sandbox ” is one o f the innovative supervisory solutions that helps traditional and new entrants test a range o f innovative products, services and tech prior to releasing it upon the wider regulated financial services market. This article assess why, despite many calls from market participants and policymakers across the EU 27, no pan-EU Sandbox exists as o f yet and what lessons or transferable solutions the UK can offer the EU and the 27 individual Member States. [ABSTRACT FROM AUTHOR]

Modern financial regulation has predominantly been economically-driven,1 progressing from addressing market failures to making markets more competitive and work better.2 The UK Financial Conduct Authority is expressly mandated to pursue regulatory objectives that maintain market integrity and protect consumers (addressing market failures) and to promote competition (making markets work better).3 Both the FCA and its sister regulator, the Prudential Regulation Authority (for banks), have recently adopted innovative regulatory initiatives to promote technologically-driven innovation, aimed at making markets work better. These initiatives are also a response to the recent explosion of technologically-led financial innovation outside of the regulatory perimeter.In promoting financial innovation, we argue that the regulators have insufficiently focused on the need to govern financial innovation more generally. Although this concern may seem premature, the regulatory innovations are increasingly extending the perimeter for regulatory oversight of financial innovations. As the regulatory innovations have the potential to develop into more mature regulatory frameworks for governing financial innovation, we argue that regulators should manage the risks of their current approach and develop a regulatory strategy framework for balancing regulatory objectives and developing regulatory policy. We propose a framework anchored in rationality, consistency and accountability in governing financial innovation. [ABSTRACT FROM PUBLISHER]

Purpose To summarize developments by the US Consumer Financial Protection Bureau (“CFPB”), the US Office of the Comptroller of the Currency (“OCC”), and the UK Financial Conduct Authority (“FCA”) in their respective efforts to facilitate responsible financial innovation, and to predict what the financial services industry may expect in coming months.Design/methodology/approach This article summarizes financial marketplace developments of particular interest to the CFPB based on the CFPB’s report on its initiative to support responsible financial innovation and CFPB Director Richard Cordray’s speech at the Money 20/20 conference. The article also discusses the OCC’s release of a framework for its “Innovation Initiative”, providing insight to how the agency intends to engage with the fintech industry. Finally, this article explains how the FCA has identified the first cohort of firms to participate in its regulatory sandbox to test new financial products and services as part of the FCA’s wider “Project Innovate” initiative.Findings Financial technology innovators should closely monitor the agencies’ recent regulatory and policy developments to facilitate responsible financial innovation to be aware of new opportunities and regulatory consequences.Originality/value This article provides practical advice for fintech companies and other financial innovators on regulatory and policy updates from experienced financial services lawyers. [ABSTRACT FROM AUTHOR]

The importance of “culture” has emerged as a key regulatory theme around the globe, as regulators, enforcement authorities and courts seek to promote cultural change in the financial services industry. These developments raise interesting and complex questions for firms around what is the “right” culture, how do you measure whether you have it, and whose responsibility is it to set the organisation's culture? Clifford Chance partners and representatives from the UK's Financial Conduct Authority discussed expectations of firms and what needs to be done, at seminars in March 2015. [ABSTRACT FROM PUBLISHER]