Topic: FCA review finds weaknesses in some challenger banks’ financial crime controls
Overview: A review by the FCA has found that challenger banks need to improve how they assess financial crime risk, with some failing to adequately check their customers’ income and occupation. In some instances, challenger banks did not have financial crime risk assessments in place for their customers.
The review, conducted over 2021, identified a rise in the number of Suspicious Activity Reports reported by challenger banks, raising concerns about the adequacy of these banks’ checks when taking on new customers.
Challenger banks aim to compete with traditional high street banks using smarter technology and more up-to-date IT systems. Many are recent entrants to the UK financial markets, with online only business models and offering financial services through smartphone apps.
The FCA’s review during 2021 found some evidence of good practice, for example innovative use of technology to identify and verify customers at speed.
The review focused on challenger banks that were relatively new to the market and offered a quick and easy application process. This included 6 challenger retail banks, which primarily consist of digital banks and covering over 8 million customers.
Firms should also review our recent strategy setting out our expectations for financial services.
Sarah Pritchard, Executive Director, Markets at the FCA said: ‘Our 3-year strategy highlights our commitment to reducing and preventing financial crime. This is important in creating that confidence for consumers and market participants in financial services and in demonstrating that the UK is a safe place to do business.
Challenger banks are an important part of the UK’s retail banking offering. However, there cannot be a trade-off between quick and easy account opening and robust financial crime controls. Challenger banks should consider the findings of this review and continue enhancing their own financial crime systems to prevent harm.
Topic. FCA finalises proposals to boost disclosure of diversity on listed company boards and executive committees
Overview: The FCA has finalised rules requiring listed companies to report information and disclose against targets on the representation of women and ethnic minorities on their boards and executive management, making it easier for investors to see the diversity of their senior leadership teams.
The FCA’s approach sets positive diversity targets for listed companies. If they cannot meet them, they need to explain why not. This approach allows flexibility for smaller firms or those based overseas. The rules also allow companies to decide how best to collect data from employees to show they are meeting the targets.
The rules will apply to listed companies for financial accounting periods starting from 1 April 2022. The FCA will review the rules in 3 years’ time to make sure they are working and to check if the diversity targets are still appropriate.
This work reflects the FCA’s focus on speeding up the pace of change around diversity and inclusion in financial services.
Sarah Pritchard, Executive Director of Markets at the FCA said: ‘As investors pay increasing attention to diversity at the top of the companies they invest in, enhancing transparency at Board and executive management level will help hold companies to account and drive further progress.’