Our top ten enforcement takeaways from the FCA Business Plan 2024/25

1.  Resilience. Persistent inflation, global financial risks and geopolitical risks mean that firms must be prepared to demonstrate how they will remain resilient in the face of “extreme events”. The FCA is particularly concerned about increasing levels of systemic risk building up in the financial system due to firms’ reliance on critical third parties. It will be sharing relevant information and data identified through its new financial resilience return, including good and poor practice of wind-down planning. There is also a consultation paper in the pipeline which is expected to clarify the FCA’s expectations on how firms should report operational resilience incidents to the regulator.

2.  Financial crime. The FCA will focus on proactive assessment of firms’ AML systems and controls, for firms deemed higher-risk, and continue its focus on firms who may be enabling financial crime. It will continue to take a data-led approach to identifying potential harm and focusing supervisory and enforcement action and is increasing investment in its systems so that intelligence and data can be used more effectively.

3. Market oversight. The FCA is strengthening its capability and capacity through people, technology and data to predict and be more responsive to heightened market volatility and events in global markets. It intends to carryout increased market monitoring of fixed income and commodities markets and is increasing its ability to detect and pursue cross-asset class market abuse.

4.  Market abuse systems and controls. The FCA will be publishing the results of a peer review of market abuse systems and controls at providers of Direct Market Access. It will also publish revised market cleanliness data which it says captures more anomalous trading.

5.  Consumer Duty. Interventions will continue to focus on failure to implement the new duty; where the FCA perceives the greatest risk of harm and in relation to firms who are behind in identifying and addressing gaps. The FCA is sharpening its focus on the experience of vulnerable customers.

6.  AI. The FCA is interested in using AI to help prevent fraud and scams and also to improve the customer experience. It is piloting an AI hub to support “innovators”.

7.  Digital assets. Digital securities and tokenisation both get a special mention. The Digital Securities Sandbox opens for applications in 2024 and work appears to be on-foot to deliver a market abuse regime for crytoassets.

8.  Tech firms and professional advisers. The FCA will publish the outcome of its consultation on the data asymmetry between BigTech and other financial services firms. It is also collaborating closely with the Digital Markets Unit in the Competition and Markets Authority on the new pro-competition regime for digital markets. On professional advisers, the FCA is strengthening proactive supervision through the Office for Professional Body Anti-Money Laundering Supervision to drive improvements in the legal and accountancy sector.

9.  ESG. The FCA plans to extend the existing regime, starting with a consultation on Portfolio Management in 2024. There is mention of the FCA “preparing to have regard to a nature regulatory principle” that is coming into force but it is not entirely clear what the FCA is planning to do.

10.  Markets and products in focus. Insurance, credit cards, pensions, motor finance, access to cash, fixed income and commodities markets, derivatives markets and bonds markets are all on the regulatory radar.

This is the final year of the FCA’s three-year strategy for 2022-25. It is the first time the FCA has prepared a three-year strategy and it is not yet clear whether another three-year strategy will follow or if the FCA will adopt a new approach in 2025. This year’s business plan includes the same thirteen public commitments as last year but “preparing financial services for the future” has been de-prioritised, reflecting the progress the FCA considers it has made on this particular objective.