Greg Kilminster
Head of Product - Content
Enforcement
For the second month running, the UK’s Financial Conduct Authority (FCA) imposed a couple of relatively rare financial penalties. The first was against broker ADM Investor Services because of a failure of anti-money laundering (AML) systems and controls. This was swiftly followed up by an £11 million fine for Equifax and consumer data breaches. The two fines were the third and second largest of the year respectively.
The UK regulator has imposed financial penalties on just eight different entities this year, a far cry from the US where around 30 fines were imposed by the Commodity Futures Trading Commission (CFTC), Financial Industry Regulatory Authority (FINRA) and the Securities and Exchange Commission (SEC) in October alone, including FINRA’s $2 million fine against HSBC for conflict of interest breaches and BlackRock’s $2.5m penalty for failing to disclose the true nature of an investment.
The second largest fine in the US in October however was issued by the Federal Reserve against Metropolitan Commercial Bank who were fined approximately $14.5 million for violations of customer identification rules and deficient third-party risk management practices. The largest fine was for Shinhan Bank, which was fined $15 million by FinCEN for willful violations of the Bank Secrecy Act (BSA).
Consultations
Nevertheless, enforcement activity was a little quieter in October 2023 than in previous months of the year, but the month saw plenty of consultation and priorities activity amongst the main global players. Now is the time of year that regulators compile their priorities, plans and programmes for the following year and October did not disappoint. The European Banking Authority and European Securities and Markets Authority (ESMA) announced their work programmes, followed a week later by the European Insurance and Occupational Pensions Authority, ESMA also published its latest consultation on developing regulatory technical standards to facilitate the Markets in Cryptoassets regulation (MiCA). FATF meanwhile outlined its forthcoming initiatives towards the end of the month and CFTC chair Rostin Behnman also discussed CFTC’s priorities in a speech in Chicago.
In the APAC region, the Australian government announced a consultation on a regulatory framework for digital and crypto asset platforms and the Hong Kong Monetary Authority (HKMA) announced a digital fraud initiative, The Securities and Futures Commission in Hong Kong (SFC) published a consultation Paper on the Proposed Guidelines for Market Soundings. In Singapore meanwhile the Monetary Authority of Singapore (MAS) and Infocomm Media Development Authority (IMDA) published a joint consultation paper proposing a Shared Responsibility Framework (SRF) for phishing scams, one of six consultations published by MAS in October alone.
Policies and Procedures
In the UK, the Economic Crime and Corporate Transparency Act 2023 came into force introducing significant new powers and laws to try to tackle economic crime. More controversially perhaps the UK regulators lifted the cap on bankers’ bonuses this month. October also saw the introduction of the FCA’s crypto financial promotions regime which was followed just a few weeks later by additional guidance published by the regulator to help crypto firms adjust to the new regime. In a speech FCA chair Ashley Alder outlined the UK regulator’s priorities for the asset management sector. Also, the Financial Industry Regulatory Authority (FINRA) confirmed that it is discontinuing collection of data under Rule 4540.
In the US, the SEC adopted new short-selling rules, and also adopted rule amendments governing beneficial ownership. FinCEN proposed a new rule which would require financial institutions to implement new recordkeeping and reporting requirements regarding convertible virtual currency (CVC) mixing, The Federal Trade Commission (FTC) approved an amendment to its Safeguards Rule that will require non-banking financial institutions to report certain data breaches and other security events to the agency. Three federal bank regulatory agencies (the Federal Reserve, the Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency) issued a final rule to strengthen and modernise the Community Reinvestment Act.
Finally, in APAC, the Australian Securities & Investments Commission (ASIC) announced its retail sector priorities and the Securities and Futures Commission (SFC) and the Hong Kong Monetary Authority (HKMA) jointly updated their virtual asset guidance.
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