Financial Crime World

UK Financial Institutions Face Compliance Dilemmas

In the United Kingdom, regulatory compliance has become a crucial aspect for financial institutions to ensure they operate ethically and abide by industry-standard best practices. The purpose of introducing regulatory measures is largely to protect the public consumer from high-risk financial management practices.

Regulatory Bodies Play a Key Role

Independent bodies such as the Financial Action Task Force, Prudential Regulation Authority, and European Securities and Markets Authority play a key role in managing and tracking compliance regulations. Each category of financial institution has its own set of regulatory obligations, reporting requirements, and level of regulatory risk.

Ensuring Compliance

To ensure compliance, financial institutions typically work with a compliance officer or team to determine compliance risk and meet regulatory standards. This may involve:

  • Internal audits
  • Creation of privacy notices
  • Changes to data protection policies

Consequences of Non-Compliance

However, those who disregard official regulations can face severe consequences, including:

  • Fines
  • Corporate punishment
  • Even imprisonment

A Brief History of Compliance in the UK

The origins of regulatory compliance in the UK date back to the 1979 Banking Act. Prior to this, banks operated with little oversight, earning them a reputation as a “secretive gentleman’s club.” The need for regulation became apparent following financial disasters such as the secondary banking crisis.

In 1987, the Financial Services Authority was formed to provide a clearer framework for regulatory measures and remove self-regulation from banks. Although now abolished, its legacy lives on through three major UK regulatory bodies:

  • Financial Conduct Authority (FCA)
  • Financial Services and Markets Act (FSMA)
  • Bank of England (BoE)

Who is Subject to Regulatory Compliance?

Depending on factors such as business area, size, and revenue, organisations may be subject to different regulations. Additionally, regulatory change is constant, making it essential for financial institutions to stay up to date with compliance requirements.

Examples of regulated organisations in the UK include:

  • Insured, commercial, or private banks
  • Brokers or dealers in commodities
  • Currency exchange companies
  • Credit card issuers
  • Lenders or funding companies

Automated Compliance Solutions

Meeting compliance obligations manually can feel like an impossible task. However, automated software can be a solution to meeting privacy, cybersecurity, and risk obligations, allowing financial institutions to focus on other critical aspects of their business.

As the regulatory landscape continues to evolve, it is essential for UK financial institutions to prioritize compliance and stay ahead of the curve.