The Financial Conduct Authority of the United Kingdom (the CIF) released its business plan for 2022/23, setting out its business priorities for the coming year, as well as its strategy for 2022 to 2025. But what does this mean for fintechs? Here are our top five takeaways.
- Financial crime remains a concern: The FCA wants to see a reduction in authorized push payment fraud, investment fraud and money laundering. The FCA is pointing to crypto-asset firms in particular, stressing that it will continue to oversee crypto-asset firms’ compliance with money laundering regulations and act quickly when such firms are at risk of being used as conduits for illegal activities, or when companies harm consumers or the market. integrity (for example, operating without registration, perpetrating fraud or high-risk activities). The focus on crypto-asset firms is perhaps no surprise as a recent Freedom of Information request showed that reports to the FCA of crypto-asset scams had doubled in 2021 compared to 2020 (2021: 6,372 reports; 2020: 3,143) and this was by far the most reported issue. on the FCA’s ScamSmart website last year.
- Financial promotions are in the spotlight: The FCA recognizes that the increased digitization of financial services means that consumers can access these services quickly and easily without the need for intermediaries. Such ease of access makes it even more important that consumers receive good information to make good decisions; however, the FCA remains concerned about advertisements that are illegal, unclear, unfair and misleading. This year, we can expect new rules (for example, regarding high-risk investments and approval of financial promotions) and more FCA interventions targeting illegal promotions, related websites and social media. And don’t forget that some eligible crypto-assets will be included in the UK financial promotions scheme (you can read more about this here).
- The FCA wants to encourage competition in digital markets: The FCA sees competition in digital markets as essential to achieving good outcomes for consumers. This is so that the development of digital markets and the use of new technologies lead to fair value for consumers. Additionally, the use of these new technologies with respect to digital financial products and services should empower consumers to make decisions in their best interest (language we see throughout the FCA’s proposed new Consumer Duty). Among other things, the FCA indicates its intention to examine the competition risk and benefits of Big Tech entering financial services.
- We will see more crypto-asset regulation: The UK Treasury has confirmed that stablecoins used as a means of payment will be brought into the regulatory scope (you can read more here), and the FCA has therefore confirmed that it will consult its regime for these stablecoins later this year. The FCA also indicates that additional regulation of crypto-assets may be needed as the industry evolves. In this regard, given that the UK Treasury has also confirmed that it will consult on broader regulation of the crypto-asset sector, the FCA indicates that it will work with the UK government and other parties through the group. Crypto-Assets Working Group to design a UK approach to crypto-asset regulation that balances innovation and competition with the need for orderly markets and consumer protection.
- Data is at the heart of FCA’s strategy: FCA recognizes that data is essential to its own role – the FCA Data Strategy will be published in the coming months and will outline how FCA intends to use data to improve its real-time understanding of what is currently happening on market and emerging risks. The FCA has explored the use of synthetic datasets to test financial crime controls and is actively exploring the use of advanced learning techniques, such as AI, for its own oversight and enforcement. Better use of data by the FCA (and other regulators) will inevitably lead to greater scrutiny of market participants. We can expect the FCA to use data when considering, for example: pricing (for example, when assessing compliance with the price and value resulting from the proposed new consumer obligation ); new products and decision support tools for consumers; and identify potential financial crimes and other misconduct. We can also expect the FCA to focus on good governance and data protection, especially given recent warnings of heightened risks of cyberattacks.