On 11 July 2018, the FCA published a speech by Mark Steward (Director of Enforcement and Market Oversight, FCA) . The speech, MiFID II and the fight against financial crime, was delivered on 3 July 2018. Highlights include:
- from 3 July 2018, legal entity identifiers (LEIs) have been required before firms can trade on behalf of their clients, following a six month implementation period;
- since MiFID II commenced, the FCA’s market data processor has ingested nearly 3.5 billion transaction reports, averaging over half a billion reports per month. By contrast, for the first six months of 2017, the monthly average was around 390 million, representing an increase of over 55%;
- the FCA has heavily invested in its technical ability to ingest, process and use all this information. It has planned for a 20% increase in capacity and processing of data over 5 years;
- the FCA has commenced a small number of investigations into firms’ systems and controls where, for the first time, it has indicated to those firms that it is looking at whether there has been any misconduct that might justify a criminal prosecution under the Money Laundering Regulations;
- criminal action is likely to be reserved for the more serious cases, which will need to satisfy both the evidential test (beyond reasonable doubt) as well as the public interest test. Mr Steward states that it is hard to be definitive as to what a serious case will look like but adds that “it would seem safe to say that where we see what appears to be facilitation of suspected serious crime, in circumstances where plainly obvious checks and questions have neither been carried out or asked, it is likely the test of seriousness will be passed”; and
- the development of LEIs is important and have become the FCA’s radar but they are not ends in themselves. Systems and controls help the FCA to know where to look. To work well, the FCA must ensure that the clues are noticed, the questions are asked and those who turn the other way are made accountable.