The UK's Financial Conduct Authority has imposed just four fines so far this year - a record low, down 75% from 16 issued in the same period last year, according to the City law firm of RPC, which has gleaned the information from a freedom-of-information request.
The four fines fell between 1st January and 15th September this year; the 16 fines fell between the same dates last year.
RPC says that disruptions to enforcement activities as a result of the Coronavirus and the accompanying lockdown "may" have hindered the FCA’s ability to impose fines, but it definitely attributes some of the shortfall to the gap between Andrew Bailey’s departure from the headship of the FCA for the Governor's chair at the Bank of England and Nikhil Rathi’s appointment to his old job.
The law firm says that the lockdown has hampered the regulatory body in its efforts to interview witnesses and suspects, as these usually happen in person on its premises.
Lockdown restrictions are now beginning to ease and the FCA is, according to the inside knowledge of RPC, now determined to crack down on wrongdoing at firms. It therefore expects the number of fines to rise.
This year, three of the four fines imposed to date were due to the unfair treatment of retail customers in the consumer credit, mortgage and claims management sector. The combined value of these fines was £66.9 million. The other fine was related to poor anti-money-laundering controls at a major bank and amounted to £37.8 million.
RPC says it is anticipated that more fines will surface in consumer-facing markets, as the FCA shifts the focus of compliance work away from wholesale capital markets. According to its 2019/20 Business Plan, the FCA will be placing more emphasis on ensuring consumers receive fair treatment for products in areas such as insurance, cash savings and mortgages, and that vulnerable customers are not targeted with poor value products and services.
Jonathan Cary, a partner at RPC, told Compliance Matters: “While the FCA has issued relatively few fines in the last few months, it will want to make up for time lost during lockdown when it will, understandably, have experienced disruption and delay in a number of investigations.
“Businesses shouldn’t become complacent by this apparent lull in enforcement action – temporary disruptions encountered by the FCA and its ability to proceed to impose fines are unlikely to last much longer.
“The FCA will be looking closely at how businesses have behaved during lockdown, whether they have exercised the necessary understanding and forbearance towards their customers, many of whom will have been placed in extremely difficult financial circumstances because of Covid-19.”
During the pandemic, the regulatory body has asked financial institutions to extend "support" to consumers, although it has been rather vague about the meaning of the word in places. It has also warned against a rising tide of online fraud.