The Financial Conduct Authority’s annual business plan, which was published on 17th April 2017, highlights a number of regime changes, which are due to take effect in the coming year.

These changes will force financial services firms – including those selling investments and other financial products – to implement a much higher level of accountability at all levels.

The Senior Managers Review (SMR) and Certification Regime are already in force in the banking sector and will be rolled out to all firms under the Financial Services & Markets Act next year.

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The FCA’s business plan makes it clear that these regime changes are designed to ensure that the right people are in the right roles and that if problems arise in the future, consumers know exactly where the buck stops.

Of course this also flags up another hot topic for the FCA on the treatment of longstanding customers and how they could become vulnerable. Specifically, the FCA has recognised that firms should aim to identify and address the real-life circumstances of vulnerable customers and take steps to address the complexity of products and information available.

While this focus on governance and culture was expected, the regulator’s business plan has failed to offer any explanation about how the regime changes will sit alongside GDPR legislation.

Given the level of interaction the FCA has with the Information Commissioner’s Office (ICO) and the focus on GDPR for many firms, it has already been noted that there are likely to be some crossover issues when it comes to implementation. Firms had been hoping for greater clarity about how they should manage and prioritise these issues.

Instead, they must continue to plan for both in parallel whilst waiting for further guidance. This could significantly increase compliance risks for smaller firms that lack dedicated resources.

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The drive to eradicate money laundering has been flagged as a significant area of focus in this year’s business plan. As well as promising to use its teeth to prosecute the worst offenders, the FCA is also going to review the way money-laundering supervision is managed by professional bodies such as the Institute of Chartered Accountants and the Solicitors Regulation Authority (SRA).

This review will also lead to the creation of a new watchdog role known as the Office of Professional Body AML Supervision or OPBAS, which the FCA will fulfil. While this is a positive step that will be welcomed right across the sector, there is bound to be some concern about how the watchdog will operate and the degree of scrutiny it will have over firms’ affairs.

Cybercrime is another key area of focus in this year’s business plan and rightly so. Quoting data provided by the Office of National Statistics (ONS), the report highlights that there were 2.11 million victims of cybercrime and 2.5 million incidents of bank and credit account fraud in 2015/16.

The scale of cybercrime is now so severe that some will be questioning whether enough is being done to address it. The recent rise in the number of FinTech firms, particularly over the last 12 to 18 months, is likely to have contributed to the problem. In view of this, it could be possible that some of this investment in consumer-driven innovation needs to be redirected to protecting data and preventing cybercrime.

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A new focus for the FCA this year is a review of the motor finance industry. This will involve a detailed thematic review into how motor finance firms are lending to consumers, taking into consideration suitability and affordability assessments to ensure good customer outcomes are maintained; and prevent potential mis-selling.

Looking further ahead, the plan has identified a number of new areas of focus for 2018/19 and beyond. These include a debt management sector review to find out more about what is leading to the current raised levels of household indebtedness and whether changes are need to protect consumers. Other schematic changes are also planned.

All in all, the FCA’s business plan has covered a lot of the expected ground and addressed some important industry issues.

Sourced by Laura Havard is a legal director at Shakespeare Martineau. She advises banks, building societies, insurance companies and intermediaries on a wide range of compliance matters

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