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 JULY 2020 BRIEFING // WHAT SHIFTS IN FINANCIAL REGULATION CAN WE ANTICIPATE AS PART OF THE NEW NORMAL? MIA GREGORY FINDS OUT 

COVID-19’s combination of a global public health crisis and a deep economic and market meltdown is unprecedented, and according to the IMF’s World Economic Outlook, set to be the worst economic crisis since the Great Depression. Previous crises were painful, but a pandemic is different. The policy response is much more complex, too. What does this mean in the context of business crime? Whilst the FCA continues to prioritise consumer protection, its prioritisation of investigations has shifted. 

The FCA has gone on record stating that it is aware that firms may need to re-prioritise or even reasonably delay some of their legislative requirements. Good examples include ongoing customer due diligence reviews and transactional monitoring alerts. But it also appears to be permitting a degree of flexibility in relation to the general regulatory requirements and the compliance pressures on firms who face sanctions, moving from crisis response to supporting economic growth. 

Whilst the FCA continues to emphasise the importance of its rules (for example, any ‘bad practices’ employed by firms will remain unacceptable) it seems to appreciate that, post-pandemic, regulators need to be agile. The long-term economic impact of COVID-19 is likely to define the regulatory agenda for years to come in accordance with the regulatory body’s resources and the perceived risk of impact to the public. In fact, the FCA presupposed such a crisis in 2018 when it published a consultation seeking to address ‘operational resilience’ gaps within firms as a national stress-test for UK firms. 

However, since the outbreak of COVID-19 in the UK, deadlines to meet the consultation’s requirements have been extended on multiple occasions to alleviate the burden on business. The latest update indicates that firms will not need to meet the conditions resulting from the consultation until the close of 2021, in comparison to the initial deadline of October 2020. Notably, there have even been new rules stemming from two policy statements concerning pension transfer advice which have been delayed as a result of COVID-19. 

For firms already under investigation, it is worth noting that the FCA may shift away from its triage approach and impose new and aggressive deadlines for compliance in order to make up for lost time during COVID-19. Firms should prepare for this possibility by using this period to engage with trusted advisers to identify and document the structural resources available to them and ascertain where their vulnerabilities lie, so they can adapt to their ‘new normal’ and FCA re-engagement. 

Today, thousands of businesses are facing their biggest challenge; remaining commercially viable and compliant. If your businesses would benefit from an assessment of your regulatory system’s fit with best practice in light of COVID-19, we can help. Contact Mia.Gregory@twelvetabulae.com for more details. 

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