Compliance Updater - October 2023
A summary of key compliance stories from around the globe in October.
- Singapore looks at toughening its AML rules and single family office regime.
- FCA highlights topline themes in its Annual Public Meeting.
- UBS settles over Credit Suisse’s tuna bond scandal.
- Revolut in talks with FCA over enabling payments from red flag accounts.
- Bankman-Fried faces accusations of fraud.
- FCA starts regulating crypto marketing.
- FCA fines and bans Jes Staley.
- SEC adopts new rule on short positions disclosure.
- St James’s Place overhauls fees in response to the FCA’s Consumer Duty.
- Bankers’ bonus cap scrapped by PRA and FCA.
- NatWest lawyers’ report highlights failings over Farage.
After the money laundering swoop by police that seized assets worth more than $2bn and arrested 10 foreigners, Singapore is contemplating toughening its AML rules. Under discussion is the introduction of due diligence requirements for luxury assets including cars, watches and handbags. Single family offices could also face more stringent licensing requirements.
The UK’s Financial Conduct Authority (FCA) hosted its Annual Public Meeting where chief executive Nikhil Rathi, chair Ashley Alder and fellow directors discussed the FCA’s 2022/23 report and accounts, outlined plans and answered questions. Four topline themes were highlighted:
- Enhancing operational effectiveness – where the regulator continues to improve its authorisation process and better use data in its supervision
- Implementing the Consumer Duty – which is seen as a game-changing and flagship reform that focuses on consumer outcomes
- Progressing the regulatory reform agenda – and the inevitable divergence that will result from the FCA replacing EU requirements with its own rules
- The FCA’s new secondary competition and growth objective – which the FCA stressed will not dilute the primary objectives (there will be no “race to the bottom”)
UBS settled with the government of Mozambique over Credit Suisse’s involvement in the alleged $2bn tuna bond fraud. It will not pay any cash under the settlement which sees Credit Suisse and Mozambique “mutually release each other from any liabilities and claims”. The case dates back to 2013 when Mozambican state companies raised debt ostensibly to fund tuna fishing and other projects. Credit Suisse arranged much of the debt and the loans subsequently defaulted amid alleged looting of hundreds of millions of dollars. Mozambique was seeking $1.5bn in damages despite the fact that Credit Suisse had already paid $475m in fines and forgave $200m of Mozambican debt in 2021.
Fintech firm Revolut is in discussions with the UK’s FCA over a failure to stop payments leaving accounts that had been flagged by the National Crime Agency as suspicious. It is thought that as much as £1.7m may have been inappropriately released.
The once-celebrated crypto billionaire Sam Bankman-Fried began to face accusations of fraud in a US court. He is accused of defrauding dozens of investors and millions of customers at his FTX cryptocurrency exchange and stealing billions entrusted to his custody. FTX’s $40bn bankruptcy is thought to have been the result of Bankman-Fried’s conspiring to funnel billions in secret loans from FTX to his crypto trading firm Alameda Research, which spent lavish amounts on venture investments, luxury real estate, political donations, and marketing.
From 8 October 2023 promotions of certain cryptoassets in the UK moved into the FCA’s financial promotions regime. Fungible and transferable cryptoasset promotions now need to be clear, fair and not misleading and firms are obliged to provide specific risk warnings. Using incentives to invest is banned. The world’s largest cryptocurrency exchange, Binance, was one of the early casualties when it was forbidden from marketing.
The UK’s FCA issued a Decision Notice against former Barclays CEO Jes Staley that bans him from senior roles in financial services alongside a £1.8m fine. According to the notice, Mr Staley recklessly approved a letter from Barclays to the FCA that contained misleading statements about Mr Staley’s relationship with Jeffrey Epstein, the convicted sex offender. The regulator concluded an absence of integrity on the part of Mr Staley, who plans to appeal the decision to the Upper Tribunal.
The US Securities and Exchange Commission (SEC) adopted a new rule that requires institutional investment managers to report gross short positions in equities. For listed equities, monthly gross short positions with either a dollar value of $100m or more, or amounting to 2.5% or more of the shares outstanding require reporting. The reports will be aggregated and published by the SEC 14 days after the month end. The new rule is intended to bolster transparency and improve price discovery.
St James’s Place announced changes to its charging structure which some had criticised as opaque and expensive. It will introduce a new charging structure for most new investment bonds and pensions that will operate without early withdrawal penalties and will unbundle fees between initial and ongoing advice, investment management and product administration. The new structure will come into effect in the second half of 2025, and is thought to have been driven by the FCA’s Consumer Duty initiative.
As part of the drive to boost the City of London, regulators the FCA and the PRA are scrapping the EU inherited rule that limits bankers’ bonuses to twice base pay. The PRA said the cap “had been identified as a factor in limiting labour mobility” and the FCA said the change would “help remove unintended consequences” by giving firms the flexibility to cut pay to deal with poor performance or misconduct. The new rules started on 31 October.
NatWest published a report by law firm Travers Smith on its treatment of Nigel Farage. The law firm found that the decision to drop Farage as a client of NatWest subsidiary Coutts was primarily commercial and lawful. However, the bank failed to communicate the decision properly and then mishandled Mr Farage’s complaint. The report said, “Coutts failed to pay due regard to the interests of Mr Farage and failed to treat him fairly in the round”. The Information Commissioner’s Office has already found that the former CEO Alison Rose broke data protection laws by revealing details relating to Mr Farage to a journalist, and the FCA has announced its own probe into the matter.