UK financial crime enforcement updates from the SFO and FCA

Both the Serious Fraud Office ("SFO") and Financial Conduct Authority ("FCA") have recently emphasised the increasing importance of utilising technological tools in their review of data; and of adopting a coordinated, collaborative approach with other institutions, in order to tackle economic crime. This briefing summarises some of the key takeaways from those speeches, which will be relevant to any companies who find themselves considering their strategy for liaising with these agencies in the context of suspected financial crime offences.

On 5 September 2024, the FCA's Sarah Pritchard (Executive Director, Markets and Executive Director, International) delivered a speech at the Financial Crime Summit in London. She noted that:

• In the last financial year, the FCA charged 21 individuals with financial crime offences; the highest number of charges they have made to date in a single year.
• In 2023, the FCA secured three times as many freezing orders as in 2022, restraining more than £21 million in assets of individuals under investigation.

She emphasised the need for a targeted and outcomes-focused approach in order for the FCA to tackle financial crime in an effective and proportionate manner. This includes:

Approach to data

• Using data to spot outliers and issues and sharing the conclusions from that data with firms. The FCA has created a dedicated financial crime function within its Consumer Investments department to proactively identify outliers, including for example: a high turnover of money laundering reporting officers, frequent changes to a firm’s registered name, or significant changes to the nature of service provided post FCA-authorisation.
• Pre-empting how criminals use new technology such as AI.
• Using data and technology, the FCA has increased its capacity to identify issues with financial promotions on websites and social media, ranging from inadequate risk warnings to misleading or untruthful advertisements. The FCA is screening approximately 100,000 websites each day, and over 10,000 adverts were either amended or withdrawn as a result of the FCA's action in 2023. The FCA also published 2,285 alerts to help protect consumers from financial fraud, an increase from 1,800 in 2022.

Collaborative approach

• Since April 2023, the FCA has published five reviews of firms' financial crime controls with examples of good and poor practice across the sector, so that firms can be better informed and target their approach.
• Working with the public and private sector, including regulated firms. In the past year, the FCA have worked with Big Tech companies (such as Google, Bing and Meta) to ban paid-for adverts for UK financial services that are not approved by an FCA-authorised firm, and with Apple and Google to remove apps from their stores that breach the FCA's financial promotions rules.
• In July, the FCA joined with the National Crime Agency ("NCA") and seven UK banks as part of a major NCA-led project to identify and act against organised crime. A joint team analysed account data shared by participating banks that suggested potential criminality. As well as identifying several new organised crime networks, the project has delivered vital intelligence in support of wider NCA and law enforcement investigations.

On 2 September 2024, the SFO's Interim Chief Capability Officer Freya Grimwood delivered a keynote speech at the Cambridge International Symposium on Economic Crime. She noted that:

Machine learning

• The SFO is currently trialling machine learning to support teams with the review of material in their cases. Disclosure accounts for 25% of the SFO's operational budget, so it is intended that machine learning will prove more cost-effective in the longer term.

Sources of information

• The SFO aims to make better use of whistleblowers, including by incentivising them to come forward.
• The SFO wants to encourage those complicit in criminality to work with the SFO, for example by continuing to offer immunity in appropriate circumstances.
• The SFO is updating its guidance to companies to provide more clarity on how it expects them to cooperate if they suspect wrongdoing, and what assistance the SFO expect to consider when opening Deferred Prosecution Agreement ("DPA") negotiations. This is intended to enable companies to make better informed decisions.

The SFO's statements have been made against a backdrop of the Institute of Economic Affairs' ("IEA") recent recommendations, placing the SFO under increasing pressure to demonstrate that it is effectively preventing and prosecuting economic crime. The IEA has published a discussion paper, recommending that the SFO be replaced by a Serious Economic Crimes Office ("SECO") that would take a more active role in the prevention of economic crime.

The IEA envisages that the new body would retain powers to prosecute serious fraud (with expanded powers to set standards and impose regulatory sanctions) but would also develop good practice advice on prevention of economic crime in closer collaboration with the private sector. The SECO could embrace alternative justice mechanisms, including DPAs and issuing larger fines.

It remains to be seen whether the IEA's recommendations will impact the SFO's future. It is clear, however, that both the FCA and SFO continue to place a strong focus on the investigation of suspected financial crime, and the appropriate resolution of such cases, meaning that this area is likely to remain a key enforcement focus for the foreseeable future.