Compliance Updater - March 2024

A summary of key compliance stories from around the globe in March.

1. FCA sets out its priorities for 2024/25.
2. FCA announces investigation into super-complaint re personal guarantees.
3. US SEC enacts rule on company disclosures of climate risks.
4. UK’s FCA set to soften approach to crypto exchange-traded products.
5. Lynch trial begins over HP-Autonomy deal.
6. Carer and assistant to crypto supervillain convicted of money laundering.
7. “Finfluencers” warned by UK FCA.
8. UK court rejects appeals to overturn interest rate rigging convictions.
9. Bankman-Fried sentenced to 25 years.
10. Conflicts failings at German credit rating agency result in €2.2m fine.

FCA sets out its priorities for 2024/25.

The UK’s Financial Conduct Authority (FCA) published its Business Plan for 2024-25, setting out its programme of work for the final year of its three-year strategy to achieve better outcomes for consumers and markets. Specific issues it will prioritise include:

• Testing whether firms are meeting the high standards set by the Consumer Duty, that ensures consumers get the help they want, at a time they need it and at a cost that is affordable. 
• Supporting people’s long-term financial wellbeing by reviewing the way advice and support are delivered to consumers, and taking advantage of new and emerging technologies to enhance consumer experiences and outcomes.
• Making sure pension products deliver value for money.
• Contributing to UK competitiveness and growth by improving the attractiveness and reach of UK wholesale markets, supporting firms to invest, innovate and expand and continuing to make it quicker and easier for firms to apply for authorisation.
• Building on the significant progress already made to become a world-class data-led regulator by automating more analytics tools to help detect and respond to consumer harms faster and working with firms on the safe deployment of artificial intelligence.

FCA announces investigation into super-complaint re personal guarantees.

The Federation of Small Businesses issued a super-complaint to the FCA in December 2023 surrounding banks’ requirements for personal guarantees on loans made to small and medium-sized enterprises. The complaint suggests that the guarantees required may be excessive and have a detrimental impact on business’s opportunities to grow. A super-complaint is an issue raised by a consumer body which it considers may be giving rise to significant damage for consumers. The FCA announced it will collect data so that it can consider the need for further work and engage with the Treasury.

US SEC enacts rule on company disclosures of climate risks.

The US Securities and Exchange Commission (SEC) passed a rule that requires public company annual reports to include data on direct emissions they make, and the emissions derived from the energy they purchase. The disclosures are mandatory where emissions are material. The rule supersedes previous guidance and will see the information included in SEC filings.

UK’s FCA set to soften approach to crypto exchange-traded products.

In the wake of the US SEC allowing spot bitcoin ETFs in the US, and the rally in bitcoin prices subsequently, the UK’s FCA is softening its approach to crypto. The FCA said it would “not object” to the creation of bitcoin and ethereum backed exchange traded notes for professional investors. The explanation presented was “the increased insight and data” due to the longer period of trading history, although the FCA still feels crypto derivatives are “ill-suited” to retail consumers due to their potential for harm.

Lynch trial begins over HP-Autonomy deal.

Thirteen years after selling his software group (Autonomy) to Hewlett Packard for $11.7bn, Mike Lynch’s trial started in San Francisco. Lynch is accused of falsifying the accounts of Autonomy in the two years leading up to the deal, engineering what some have described as Silicon Valley’s biggest ever fraud.

Carer and assistant to crypto supervillain convicted of money laundering.

Jian Wen, a China-born UK national, was convicted of money laundering in a London court and will be sentenced on 10th May. The charge relates to laundering 150 bitcoins, worth about £7.5m, but Wen was linked to a much larger seizure of more than 61,000 bitcoins, worth around £2bn at the time of the arrest and around £3.4bn now. Court proceedings revealed that Wen had been taken on as a “carer and assistant” to a Chinese “supervillain” and “master of deception” Zhimin Qian (also known by her fake name of Yadi Zhang). Qian defrauded more than 128,000 people in China in a £5bn investment fraud that promised extravagant 300% returns. Qian converted her ill-gotten gains into bitcoin and absconded to the UK and is still on the run from UK and Chinese authorities. It appears that Wen was a largely ignorant facilitator to Qian, converting her bitcoin into more conventional assets including property, jewellery and pre-paid cards.

“Finfluencers” warned by UK FCA.

The UK FCA issued guidance that warned so-called “finfluencers” – those trumpeting financial products online – that promoting is about the law, and not just the likes. There is a danger of committing a criminal offence punishable by up to two years in prison and an unlimited fine. Firms were also reminded that they were “on the hook” and needed to ensure influencers they worked with communicated in the right way.

UK court rejects appeals to overturn interest rate rigging convictions.

Tom Hayes was convicted of rigging Libor nine years ago and spent five and a half years in prison. His attempt to overturn his conviction was heard alongside that of Carlo Palombo who had received a four-year sentence for manipulating Euribor. Both appeals were rejected despite a 2022 US judgement that overturned convictions for two former Deutsche Bank traders for alleged Libor rigging.

Bankman-Fried sentenced to 25 years.

Sam Bankman-Fried, the man behind the collapsed crypto-exchange FTX, was sentenced to 25 years in prison. The 32-year-old was found guilty of seven counts of fraud and money laundering at the end of 2023 and the sentencing judge said Bankman-Fried knew what he was doing was “criminal” and lacked “any real remorse”.

Conflicts failings at German credit rating agency result in €2.2m fine.

German credit rating agency Scope was fined €2.2m by the European Securities and Markets Authority. The fine was for failures to flag and address conflicts of interest when rating the German banking unit of the collapsed payment processor Greensill Capital. Scope provided other advisory services in addition to the credit rating and failed to reveal this in its rating. Additionally, the former chair of Greensill Capital was a shareholder in Scope’s parent company and a member of its advisory board.