Over the past 18 months, the Financial Conduct Authority (FCA), as the United Kingdom’s conduct regulator for nearly 60,000 financial services firms and financial markets and prudential supervisor for nearly 50,000 firms, has sent markedly conflicting signals about its commitment to pursue criminal as well as civil investigations under the Money Laundering Regulations 2017 (MLRs).
In April 2019, the FCA’s Director of Enforcement and Market Oversight, Mark Steward, publicly stated that he thought it was “time that we gave effect to the full intention of the [MLRs] which provides for criminal prosecutions.” He further disclosed “that we are now conducting ‘dual track’ AML investigations” (i.e., investigations into suspected MLR breaches that could give rise to either criminal or civil proceedings).” At the same time, Steward commented that he “suspect[ed] criminal prosecutions, as opposed to civil or regulatory action, will be exceptional.”
Subsequent events have shown just how exceptional criminal enforcement by the FCA would be. In its 2019/2020 annual report, the FCA, while declaring its aim to be “to make the UK’s financial markets robust against criminal activity,” acknowledged that its Regulatory Decisions Committee had received 26 percent fewer cases of all types since the 2018/2019 reporting period, including only 5 criminal cases.
Moreover, the Financial Times recently disclosed that the FCA had discontinued seven of its 14 criminal investigations into MLR breaches since January 2020, and had yet to bring a single prosecution. Five of the terminated investigations were “single track” (i.e., exclusively criminal) investigations, and the remaining two were “dual track” investigations.
As for the remaining seven investigations, only one single-track investigation was still underway, and the other six were dual track. Furthermore, to date there reportedly have been no criminal prosecutions under the 2017 MLR, and only one criminal prosecution under the prior 2007 money laundering rules.
In response to the Financial Times reporting, an FCA spokesperson said that the FCA “only brought prosecutions ‘in the most egregious cases,’ and pursued civil or regulatory sanctions in all others.” The spokesperson also noted that decisions on some of the remaining criminal investigations were expected “by the end of this year.”
No one expects the FCA, as a regulatory agency, to vie with the National Crime Agency or police services in conducting large numbers of criminal investigations. But the FCA needs, as Steward commented in his 2019 speech, “to enliven the jurisdiction if we want to ensure it is not a white elephant and that is what we intend to do where we find strong evidence of egregiously poor systems and controls and what looks like actual money-laundering.” So far, the FCA’s stance and record on criminal investigations appear remarkably elephantine.