Financial penalties issued by regulators around the world reached skyrocketing records last year.
According to compliance firm SteelEye, the UK’s Financial Conduct Authority (FCA) handed out 26 fines in 2022, a stark increase from the 10 of 2021.
The total value dipped however, from £563.3m ($700m, €643m) in 2021 to £215.8m in 2022.
SteelEye believes this shows a shift in regulatory strategy where in the past the FCA focused on larger-scale breaches by big banks and blue chips, whereas now it is taking in consideration regulatory non-compliance from companies of all sizes.
Between 2020 and 2022, a total of 47 fines were issued by the FCA; 43% (20) mentioned breaches of principle 3 of the watchdog’s Principles of Conduct which relates to management and control of a business.
In 10 cases, (21%), principle 2 was mentioned, relating to conducting business with due skill, care and diligence; followed by nine cases of market abuse; five for customer mistreatment and four for money laundering.
Across the pond
Similarly, the US’ Securities & Exchange Commission (SEC) issued a record $6.4bn (£5.1bn, €5.8bn) in penalties, with $1.1bn recovered from its crackdown of Whatsapp alone.
This came from a total of 760 enforcement actions – up 9% from the previous year.
Brian Lynch, president of SteelEye US, said: “[Unauthorised messaging apps] are becoming ubiquitous in certain markets, and yet SteelEye’s 2022 Compliance Health Check report, which surveyed 170 senior compliance professionals in financial services, found that just 15% of firms are monitoring Whatsapp.
“Even fewer are monitoring Slack (9%) and Signal (3%). If we consider the more expected channels, it is clear that there is significant work to be done, with just 40% capturing Microsoft Teams, and 25% Zoom.”
Europe
Other European regulators also reported several enforcement actions in 2022:
- Germany’s BaFin and the Federal Office of Justice issued 46 fines in the 12 months totalling €24.6m (£21.6m, $26.7m);
- In France, the Autorité des Marchés Financiers raked in a grand total of €95m from 15 fines; and
- The Dutch Authority for the Financial Markets only levied three fines against two firms which brought in €903,000.
Matt Smith, chief executive and co-founder of SteelEye, said: “There remains a lot of work to be done by financial services firms to ensure they do not fall short of their obligations. As regulators get more aggressive in their enforcement action, firms need to really think about how robust their compliance programs and policies are.
“Particularly against the backdrop of recession fears, pressure to perform is mounting. With that, firms of all sizes are putting de-risking strategies in place.
“Meanwhile, regulators are using powerful data analytics tools to identify malpractice more accurately among the companies they regulate, meaning more firms are at risk of scrutiny. Investing in technology is key for firms to ensure they can identify risks, and increasingly, this requires an integrated approach to compliance. As such, we expect many players will up-skill and up-tool in 2023.”
