Welcome to the UKGI weekly regulation update service for Aviva ABC brokers

Context

The FCA has announced that five fast-growing firms have joined the FCA’s Scale-up Unit, receiving tailored support to help them innovate, navigate regulation and grow sustainably.  ClearScore, Modulr, Teya, Urban Jungle and Zilch, spanning payments, consumer finance, credit information and insurtech, are the first firms regulated solely by the FCA to take part.  

Key points to note and next actions

• The Scale-up Unit gives firms tailored regulatory support as they develop new products, respond to policy changes and manage the challenges of rapid growth.  
• ‘High-growth firms play a vital role in driving economic growth across the UK,’ said Jessica Rusu, chief data information and innovation officer, FCA. ‘We want the UK to remain one of the best places in the world to start, grow and scale a financial services business. That’s why we’re supporting ambitious firms as they scale, helping them navigate regulation and innovate with confidence.’
• Insights from a recent pilot with 15 high-growth firms, published on 10 August 2026, show that early investment in governance, risk management and controls helps firms manage the opportunities and challenges of growth, as well as scale sustainably.
• The FCA warns that if firms prioritise expansion ahead of developing governance, risk management and control frameworks, this can increase the risk of harm.
• Good practice and areas for improvement, which can be applied to any firm wishing to scale-up and grow, are set out in relation to governance and senior management oversight, risk management frameworks, resourcing, capability and scalability, systems and controls, management information (MI), financial resilience, and consumer and market outcomes.

Context

The FCA is concerned about a number of risks among unregulated lenders, safe custody providers, money brokers and financial leasing companies (‘Annex 1’ firms), in particular the potential for them to facilitate financial crime.  These types of firms are listed in Annex 1 of The Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (the MLRs).  They must register with the FCA and are supervised for anti-money laundering compliance.

Key points to note and next actions

• The FCA has seen firms rely too heavily on the financial crime controls of their parent company.  Each individual firm within a group must assess whether these controls are appropriate for their financial crime risks, governance and operations.
• The FCA is also concerned about the risks to consumers and markets from unregulated lending often conducted through complex structures, including special purpose vehicles.
• The FCA recently highlighted the risks to regulated firms when doing business with Annex 1 firms. Regulated firms should continue to do their due diligence and understand the business of firms they are dealing with – including seeking direct confirmation of their registration status.
• To address these risks, The FCA is closely scrutinising applications to register as an Annex 1 firm, which need to clearly demonstrate that they can comply with the money laundering regulations. Firms should expect registration applications to take longer.
• The FCA Has also sent an information request to around 900 Annex 1 firms to improve its understanding of their activities, business models and risks. This follows on from the work the FCA did with 300 Annex 1 firms in late 2025 and means it will have contacted all registered Annex 1 firms.
• The FCA will use this and other intelligence to identify and disrupt financial crime risks in this sector. 

Context

The PRA has announced it will hold an industry roundtable to discuss CP11/26 – A tailored regime for captive insurance, which was published on 14 July 2026. 

Key points to note and next actions

• The purpose of the roundtable is to gather stakeholder views on the PRA’s proposals for a new tailored captive insurance regime and to provide additional clarity on the consultation proposals if necessary.
• The proposed regime covers single-parent captives, with plans to extend to other structures in due course. It is separate from the UK Solvency II regime, and includes
  • Proportionally lower capital and reporting requirements
  • A flexible capital resources framework
  • Faster authorisation processes, and
  • Tailoring of other regulatory requirements to reflect the typically lower risks of captives.
• It is intended that the proposed regime will make the UK a more attractive place for establishing captives whilst maintaining appropriate safeguards and advancing the PRA’s statutory objectives. The roundtable takes place on 17 September 2026 from 10.00am to 12.30pm and attendees should have read CP11/26 in advance.
• The link to attend is here.

Context

The Financial Services Consumer Panel (FSCP)is a statutory body that represents the interests of individual and small business consumers in the development of financial services regulation in the UK. The Panel advises and challenges the FCA, with a focus on ensuring consumer interests are considered from the earliest stages of policy development.  This report was commissioned by the FSCP to test the core hypothesis that there is more that could be done in the UK through regulation to improve the financial services and products available to sole traders and micro-businesses to support their growth.

Key points to note and next actions

The report is structured in three parts:

• An overview of the landscape for sole traders and micro-businesses wishing to expand and grow in the UK economy.
• An examination of the types of financial barriers these businesses face, with particular attention to barriers that fall within or adjacent to the FCA’s regulatory remit.
• A brief review of relevant international experience.

Key findings relate to:

• Personal finance reliance and persistence of personal liability.
• Access to finance has worsened over time for the smallest SMEs.
• Access to non-lending services is comparatively strong, but cashflow frictions remain.
• Barriers cluster into three recurring themes: technological; regulatory and compliance; and cultural and behavioural.

The headline recommendations are:

• Clarify how the Consumer Duty applies at the sole trader / micro business boundary.
• Outline a good “financial readiness” baseline and modernise frictions that don’t fit a digital economy.
• Assess the level of friction created by personal liability requirements (especially personal guarantees) by firms within the backdrop of the growth agenda.
• Support work already underway and accelerate consent-driven data sharing and Open Finance for SME lending.

Context

FOS has outlined in an insights article the next phase of its reforms, which are set out in a FOS Policy Statement in relation to modernising the redress system.  Changes are being introduced to transform the way FOS operates and to improve its service for consumers and firms.

Key points to note and next actions

• A new registration stage will ensure cases are within scope and ready to be investigated.
• New powers to dismiss complaints will focus our resources on the cases we were originally set up to resolve.
• The measures are part of a wider package of reforms to the redress system – including legislative changes – to support confidence in financial services, so that consumers get fair and quick compensation when things go wrong, and regulated firms have more certainty to invest, grow and compete.

The reforms include:

• An amendment to rules to provide greater clarity that our decisions are based on the standards applicable at the time of the act or omission complained about – and will not be applied retrospectively. This provides a foundation for proposed legislative changes to the ‘fair and reasonable’ remit which are currently progressing through Parliament.
• New powers to dismiss complaints that are not appropriate for the Financial Ombudsman and may be better resolved – or are already being investigated – in other ways. These include complaints that may be better suited to court, law enforcement, or another dispute resolution process, or where there has been no financial loss, or material distress or inconvenience. These will come into effect on 1 October 2026.
• A new registration stage to be rolled out next year, following a consultation on differential case fees later this year, to ensure that complaints referred to our service are within scope and ready to be investigated before being allocated to a caseworker. This will continue our work on providing a fairer funding model to better reflect costs and support earlier resolution of disputes.

Later this year, FOS will publish the first of its joint thematic reviews with the FCA to provide more insight on the types of complaints FOS sees and its approach to resolving them.  This will help to inform firms’ own complaints handling, prevent similar cases from needing to be escalated to FOS, and demonstrate how outcomes are aligned with regulators’ rules.

Context

Small and medium sized organisations (SMEs), and sole traders, across the UK are being encouraged to boost their business fitness by taking new online training from the ICO, called ‘Data Protection Essentials’.  This new training sits alongside existing resource available on the ICO website on its ‘Advice for small and medium organisations’ web page.

Key points to note and next actions

• The training is relevant to all types of business and organisations and includes sector–specific examples for the education and childcare, health and social care, professional services, retail, and property sectors.  
• Data Protection Essentials has been designed to give smaller organisations, their employees and sole traders clarity on data protection, and the straightforward, practical advice and know-how to apply the essentials confidently in their everyday work.
• The training includes practical, real-world examples tailored to different sectors, helping organisations recognise familiar situations and apply data protection in a way that’s relevant to their day-to-day operations.
• Through the programme, organisations can:
  • Take steps to improve how they manage and protect people’s information.
  • Use personal information confidently while maximising opportunities and reducing risk.  
  • Invite colleagues to build shared knowledge and confidence in handling personal information.
  • Better understand their legal responsibilities and how to meet them in practice.  
  • Demonstrate a commitment to protecting personal information and maintaining trust. 
  • After completing the training, individuals will receive a digital certificate that they can share publicly to demonstrate their commitment to safeguarding people’s information.

Context

The CII has warned that a critical artificial intelligence (AI) fluency gap across insurance and personal finance could undermine responsible adoption if firms move faster than their people’s ability to understand, challenge and govern the technology.

Key points to note and next actions

• In Responsible AI: from policy to practice, the report summarising the discussion, the CII says boards, risk functions and customer-facing professionals need practical training that goes beyond basic tool use and supports critical thinking, professional scepticism and the confidence to question automated outputs.
• The fluency gap, the report argues, is central to whether firms can adopt AI with clear purpose, professional judgement and public trust, rather than being driven by fear of being left behind, or a narrow focus on efficiency.
• The report outlines what the responsible adoption of AI looks like, highlighting the importance of behaviours such as defining the problem AI is being used to solve before selecting or deploying the technology, and ensuring any tool is appropriate for the customer, business objective and risk involved.  The report also warned against firms relying on “human in the loop” alone as a safeguard in itself, unless that human is active, informed and accountable.