FCA Fines Return to New Normal With 10-Fold Increase in 2017

  • Regulator levied $307 million in fines over the last 12 months
  • Fines fell to decade low last year after Libor, FX probes end
A logo sits on display in the headquarters of the Financial Conduct Authority (FCA) in the Canary Wharf business district in London, U.K. Photographer: Chris Ratcliffe

U.K. Financial Conduct Authority fines increased 10-fold in 2017 from the previous 12 months, returning to figures more commonly seen from the regulator in the last five years.

The FCA levied 229.4 million pounds ($307 million) in penalties this year up from 22.2 million pounds in 2016, according to the FCA’s website. The number was buoyed by a 163 million-pound sanction against Deutsche Bank AG in January for compliance failures that saw the bank help wealthy Russians move about $10 billion out of the country.

FCA fines shot-up dramatically between 2012 and 2015 due to the sanctions imposed on firms over the Libor and foreign exchange benchmark-rigging scandals. A record 1.4 billion pounds in penalties was issued in 2014, a large portion of which came from banks over the currency manipulation case. Following the end of those investigations fines last year fell to their lowest since 2007. Because the FCA generally issues less than 50 penalties a year, a large fine can have a disproportionate impact on the overall total.

"A 10-fold increase is significant, but it’s worth remembering that this is the second lowest year of fines over the past five years," said John Whittaker, a lawyer at Clyde & Co. in London.

The FCA declined to comment.

The FCA has overhauled its approach to enforcement since 2015 when enforcement head Mark Steward took up the helm. Steward has tried to move the regulator away from cherry-picking cases to act as a deterrent to the industry, instead adopting a view the regulator should pursue every lead, regardless of whether it results in an outcome. The approach has seen a record number of insider dealing investigations opened in the last two years.

The regulator also introduced the Senior Managers and Certification Regime last year in a bid to shift more responsibility for staff onto the firms that hire them. Under the new rules senior executives are forced to attest to their duties more specifically in order to better hold them to account.

"It appears that the regulator is continuing to place greater attention on individuals than in previous years," Whittaker said.

Still, the number of so-called prohibition orders issued in 2017 fell to its lowest since the 2008 financial crisis, according to data from London law firm RPC. The FCA banned 18 people from working in the industry in the 12 months to Sept. 30, down from a high of 72 in 2010.

The industry is watching the regulator closely on its actions against individuals in light of the SMCR. An investigation into Barclays Plc Chief Executive Office Jes Staley over his conduct around a whistle-blowing complaint is widely seen as the first test of the new program.

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