Penalties for regulatory compliance breaches can be eye-watering in scale.
2020 largest Fines
- Goldman Sachs International (fined £97m): PRIN 2 and PRIN 3 breaches – Risk management failures
- Lloyds Bank, BoS & The Mortgage Business (fined £64m): PRIN 3 & 6 breaches – Poor handing of mortgage customers
- Commerzbank (fined £37.8m): PRIN 3 breaches – AML failings
- Barclays (fined £26m): PRIN 6, PRIN 3, and CONC rules breaches – unfair treatment of customers in the Retail Banking sector
- Charles Schwab (fined £8.96m): PRIN 10 and 11, CASS and Section 20 FSMA breaches – Safeguarding and Compliance Issues
- Moneybarn (fined £2.8m): PRIN 6 & 7 and CONC rules breaches – Unfair treatment of customers
How could these fines have been avoided?
The Financial Conduct Authority’s (FCA) ‘Principles for Business’ (PRIN) set out the fundamental obligations for firms under the regulatory regime.
According to the FCA principle 3, a firm ‘must take reasonable care to organise and control its affairs responsibly and effectively, with adequate risk management systems’.
This refers to a firm’s:
- Robust governance arrangements – rules, practice and processes.
- Outsourcing responsibilities – know your suppliers and make sure they are compliant.
- Reasonable steps – under SMCR you need to ensure you have decision making fully and appropriately records.
- Record-keeping – keep records, and make sure they are accurate and up-to-date.
- Conduct Risk – keep records of any T&C breaches, mis-selling, product design etc.
- Conflicts of interest – keep a compliance register to avoid issues.
The FCA will identify potential or actual consumer harm caused by the actions of firms or markets and take action to address that conduct. These penalties should act as a clear warning to any companies who aren’t taking financial compliance as seriously as they should be.
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