On April 5, 2023, the UK's Financial Conduct Authority (FCA) published its Business Plan for the year 2023/24. The FCA expects a highly uncertain economic and geopolitical environment over the next 12 months, which includes a heightened risk of firm failure. The FCA's 3-year strategy is designed to be flexible, and the regulator is accelerating its work in four areas over the next year by investing further resources.
The first area is putting consumers' needs first. The FCA will continue to prioritize protecting people from unfair treatment, with more staff allocated to ensure firms support consumers who are struggling financially. The Consumer Duty, which comes into force in July 2023, will play a leading role in meeting the FCA's objective of putting customers' needs first. The FCA aims to use the Duty to encourage more innovation and competition, which could lead to a simplified approach to regulation.
The second area is preparing financial services for the future. The FCA plans to continue its urgent work with its partners to deliver the outcomes of the new future regulatory framework (FRF) and Edinburgh Reforms. More than £12 million will be invested in preparing for the FRF, intended to help support the UK's wider economic growth and international competitiveness. The FCA will also continue to support innovative and high-growth firms, including through its sandbox and its 'early and high growth' oversight function.
The third area is strengthening the UK's position in global wholesale markets. The FCA will set out further proposals to reform the listing regime to attract world-leading firms and encourage competition. The regulator also wants to see if improvements can be made to asset management regulation. As part of the Edinburgh Reforms, the FCA will consult this year on consolidated tapes to improve the cost, quality, and accessibility of wholesale data.
The fourth area is reducing and preventing financial crime. The FCA continues to look for innovative ways to reduce and prevent financial crime, including strengthening the authorisation process, improving assessments of regulated firms, and investigating and prosecuting offenders. The regulator is also developing tools to find scam sites and using machine learning and other tools to find and remove scams.
The FCA has already begun much of the work to deliver on its commitments and wants to prioritize its work to bring the most benefits to consumers, firms, and the wider economy. Later this year, the FCA will publish the first set of results against the outcomes and performance metrics included in its strategy. The regulator has also published the consultation on its fees and levies for the year ahead, proposing to freeze application fees and the minimum fees firm pay, recognizing the pressure firms are under.
The UK government is set to introduce new crypto regulations to prevent money laundering through cryptocurrency. The Financial Conduct Authority (FCA) will oversee the regulation of promotions related to qualifying cryptoassets, ensuring they are fair and not misleading. To legally promote a qualifying cryptoasset, it must either be approved or made by an authorised firm or fall within an exemption. The government will introduce a statutory instrument for the cryptoasset financial promotions regime, with a four-month implementation period. The FCA is expected to provide further rules and guidance on how it will supervise and enforce the expansion of the financial promotions regime in 2023.
For unauthorised firms currently promoting in-scope cryptoassets, it is crucial to seek legal advice and develop plans for when the exemption expires. The government's plan of action includes the implementation of the Financial Action Task Force’s Travel Rule and the passing of the Economic Crime and Corporate Transparency Bill by the end of 2023.
In the meantime, businesses can leverage technology such as Verify 365 to verify the source of funds for cryptocurrency transactions. Verify 365 uses Open Banking to access digital bank statements, analyze transactions, confirm customer identity, monitor transactions for unusual patterns, assess risk levels, and maintain regulatory compliance. By leveraging Verify 365's technology, businesses can mitigate risks associated with crypto transactions, ensure compliance with regulatory requirements, and contribute to the UK's ambition of becoming a global hub for crypto assets and innovation.
On April 5, 2023, the Financial Conduct Authority (FCA) has issued a letter to cryptoasset firms warning that they will need to comply with the new UK financial promotions regime if they market to UK consumers overseas. This new regime will apply to all firms that make financial promotions of qualifying cryptoassets to UK consumers, regardless of whether the firm is based overseas. There are four routes for communicating cryptoasset promotions to UK consumers. Firstly, the promotion must be communicated by an FCA authorised person. Secondly, the promotion can be made by an unauthorised person but approved by an FCA-authorised person. Thirdly, the promotion must be communicated by a cryptoasset business registered under The Money Laundering, Terrorist Financing and Transfer of Funds Regulations 2017 (MLRs) with the FCA. Finally, the promotion must comply with the conditions of an exemption in the Financial Promotions Order (FPO). The UK Government will provide a four-month implementation period for the financial promotions regime.