Context
Speech by Sarah Pritchard, FCA Executive Director of Markets and International, which focuses on financial crime and why it is a key focus of the FCA. While the speech is primarily focused on the investment sector, there is also read-across for all other regulated firms.
Key points to note
In this speech, Pritchard discusses highlights that financial crime is never a victimless crime and accounts for 40 per cent of all crime:
- “Sometimes people mistakenly think that because banks can reimburse victims, no one really loses out. But we all do as the costs of covering these crimes are passed on to all customers.”
Pritchard also highlights the importance of firms taking responsibility and calibrating their approach to sanctions checking:
- “Firms are the first line of defence in the fight against crime and need to understand their risks and calibrate their controls appropriately and proportionately. Those checks carried out by firms can disrupt serious criminality and protect the public. “
- “Tackling financial crime and imposing controls should not be about a rigid, inflexible system aimed at the worst-case scenario. It is not a compliance, tick box exercise. To calibrate risk, you need to understand who your clients are, identify the sorts of transactions you would expect them to make and have systems in place to flag when there is suspicious activity.”
- “You simply cannot outsource risk calibration to a third party and palm off all responsibility for keeping on top of it to external firms. Firms need to understand their risks and make sure they have a proportionate and risk-based approach to deal with them.“
In closing, Pritchard highlights that the FCA need firms to play their part:
- “My message is clear – financial crime risks differ. Risk calibration is important. Technology has a great role to play – but do not outsource all responsibility to your third-party providers – understand your clients, their level of risk, and act proportionality.”
Next actions
None – for information and awareness.