Executive Summary
2019 represented a return to robust enforcement levels with total fines of approximately £392 million across 28 actions. The year was marked by the Standard Chartered £102.2 million AML fine - one of the largest ever for correspondent banking failures - and the long-awaited conclusion of the HBOS fraud accountability cases against Bank of Scotland and Lloyds Bank (£45.5 million each).
The Senior Managers and Certification Regime (SM&CR) extended to solo-regulated firms in December 2019, significantly expanding the population of senior managers subject to enhanced accountability requirements.
Regulatory Context
2019 saw the FCA's enforcement approach mature following the structural reforms of preceding years. The Division of Enforcement increasingly focused on cases with clear consumer harm or market integrity implications, with a stated preference for intervention over investigation where possible.
The extension of SM&CR to approximately 47,000 solo-regulated firms represented the most significant expansion of individual accountability since the regime's introduction. The FCA invested substantially in guidance and engagement to support implementation.
The cryptoasset regulatory perimeter debate intensified, with the FCA assuming anti-money laundering supervision of cryptoasset firms from January 2020. The registration regime established high barriers that many firms subsequently failed to meet.
Key Enforcement Themes
- Correspondent banking AML controls face intensive scrutiny
- HBOS fraud accountability finally achieved
- SM&CR extension creates new individual accountability
- Customer due diligence standards reinforced
- Insurance sector enforcement activity increases
Professional Insight
The Standard Chartered case provides a masterclass in correspondent banking AML requirements. The FCA found failures in customer risk assessment, transaction monitoring, and enhanced due diligence for higher-risk relationships. Critically, the bank failed to implement lessons from a 2012 enforcement action - demonstrating that repeat failures attract more severe penalties.
The HBOS fraud cases finally brought accountability for the Reading fraud scandal, where bank employees conspired with external parties to defraud business customers. The delay between conduct (2003-2007) and enforcement (2019) reflects the complexity of such cases but also raised questions about timely justice.
For compliance professionals, 2019 reinforced that correspondent banking remains a high-risk area requiring dedicated expertise and resources. The 'know your customer's customer' principle applies with particular force in this context.
The SM&CR extension required solo-regulated firms to implement governance frameworks appropriate to their size and complexity. The FCA's proportionate approach acknowledged that a small IFA firm requires different arrangements than a large wealth manager.
Looking Ahead
2019 positioned the FCA for the challenges of 2020, though no one anticipated the pandemic's impact. The correspondent banking enforcement activity signalled continued focus on cross-border AML risks, while SM&CR extension promised future individual accountability cases.
The cryptoasset registration deadline of January 2020 set up inevitable enforcement action against firms operating without authorisation.