Born out of the major restructuring of the UK’s financial regulatory system following the 2008 financial crisis, the FCA reaches the age of 13 on April 1, 2026.
Are these to be difficult teenage years where it suffers from a crisis of identity, with over-digitalized exposure and where its every move is analyzed and critiqued? It can hardly be argued that the early years equated to a carefree childhood, but as the FCA transitions to a more “efficient and effective” regulator, how will this unfold as it reaches adolescence?
The caustic 2024 report by a group of MPs, labelling the FCA “Incompetent at best, dishonest at worst,” followed a series of scandals where firms were accused of mistreating consumers and small businesses. The FCA was “blamed for doing too little too late – or nothing” to prevent wrongdoing.
The All-Party Parliamentary Group (APPG) was co-chaired by Tory MP Bob Blackman, who, incidentally in 2015, was subject to a formal investigation and found to have made over 700 inaccurate mileage claims. Mr Blackman disputed the findings. The FCA pushed back on the APPG report. It stated that it had learned from these historic issues and was now a very different organization. Nevertheless, securing an appropriate degree of protection for consumers was an original core objective from its formation in 2013.
The decision by HM Treasury to create a Single Professional Services Supervisor, with the FCA taking responsibility for supervision of all Legal, Accountancy, and Trust and Company service providers, increases the number of firms supervised for AML/CTF purposes to approximately 60,000 (nearly tripling its current AML/CTF supervision numbers).
Add to that Buy Now, Pay Later (BNPL) lenders, who will be required to be officially authorized by the FCA in 2026, plus firms providing crypto-asset services in or to the UK (a persistent challenge for the FCA, primarily because of its limited powers to protect consumers from scams and market volatility), will soon be required to apply for full FCA authorization.
This feels like quite the headache to competently supervise the expansion of firms that will fall into the FCA’s orbit.
Part of the FCA’s 2025-2030 strategy is its shift to a smarter, data and intelligence-led regulator. For firms, this will mean supplying the FCA with the data it needs. However, a quick scan of the Final Notice of the recent Nationwide AML fine shows the word “data” is mentioned over 30 times, with some of these referencing challenges with data quality, data integrity, and data gaps.
The AML failings were between 2016 and 2021, but many established firms have struggled with legacy systems and data quality; rubbish in, rubbish out (RIRO), a foundation principle of computer science and data management.
The FCA has indicated it will “take a more flexible approach, with less intensive supervision for those demonstrably seeking to do the right thing.” Hopefully, firms with a history of dealing with the FCA recognize that an open and transparent “cards on the table” relationship is the best way forward. But what about newer entrants, will they equally conform when we know regulatory compliance hasn’t always been uppermost in the minds of their entrepreneurial leadership?
Not to conflate the two, but MPs looking for greater consumer protection for their constituents and a government looking to loosen regulatory requirements as part of a push for economic growth feels like quite a balancing act. So, an important phase for the regulator, with a lot of transitional change, and potentially some angst.
Gary Watson is the director of Clarionet Consulting. He is a former head of compliance and MLRO, with extensive FCA SMF 16 and SMF17 experience.
