News & Events
Regulators’ presence, resources and powers have never been so evident as in the UK in 2023. As such, it has never been more important for businesses and employers to have good policies, procedures and compliance in place.
For example, in the legal services industry, the SRA (the regulator) intervened in 3 major law firms in the UK regarding their anti-money laundering due diligence and policy in the last month alone. In addition, the SRA publicly announced that they are to increase regulatory enforcement action against lawyers who help migrants exploit the immigration system, by sharing intelligence with other regulators (banks presumably) and bringing in a task force to investigate. The SRA has also published their annual report 2021/2022, which indicates there were fewer regulatory reports received in 21/22 (10,121) than 20/21 (10,358) but more reports dealt with in 21/22 (9,972) than 20/21 (9,329.) This is a clear indication that regulatory investigations are increasing in the legal sector.
According to their published fines figures, The Financial Conduct Authority issued 10 firms/individuals with a fine in 2021. In 2022, 26 fines were issued to firms/individuals. Again, indicating the increase in investigations and actions.
2023 has seen the Financial Services and Market Act, Cyber Security Regulations, Anti deforestation regulations, starting to take force, all of which have placed greater due diligence upon businesses by regulators. These all have significant cost implications for businesses but an example and reminder as to why regulation is necessary, is perhaps reflected in Labour’s vow last month, to regulate NHS executives given the Lucy Letby trial. Regulation, after all, brings accountability.
Whether your business involves communications, care, financial services, the department of transport, the environment agency or legal services, the reality is that the demands, scope and remit of regulatory bodies are growing. They are recruiting task forces and taking on more investigations along with imposing bigger fines than ever before, at the same time that they require greater governance and due diligence from businesses.
Independent surveys in 2022 regarding litigation trends revealed an increase in criminal regulatory matters and, in 2023 over half of the businesses taking part reported that they had at least one matter with their regulator already this year. It is further predicted that UK regulators and their investigations will continue to increase over the next decade.
What does this mean for UK businesses?
It means we are more frequently asking ourselves the question, “do I upset the client asking these due diligence questions or risk receiving a hefty financial penalty from the regulator?”. Even if you do exercise robust due diligence and the regulator finds you have mitigated your position greatly, you still risk the reputational damage that comes with this type of investigation, which can, often, be far more costly than the regulator’s fine.
When dealing with a regulator, having adequate due diligence regarding your regulator’s policy is essential. Having adequately trained and diligent staff, is also essential (you can face a further fine for not being able to demonstrate this). Mitigating any potential reputational damage is an absolute priority and should form part of any business compliance consideration and process. Obtaining good legal advice regarding regulatory matters and reputational damage early in any regulatory investigation can make a huge difference to the outcome.
Should you require advice regarding regulatory investigations/interviews, prosecutions/actions, our criminal regulatory team at Andrew Jackson in partnership with Fred Marketing, regarding reputational damage, is here to help you at any stage and advise you through the process.