What is Financial Conduct Authority (FCA)?

The FCA plays a major role in the UK market, overseeing around 50,000 financial businesses and markets and acting as a regulatory watchdog for over 18,000 organizations. Its work involves giving these firms guidance and setting rules they must follow to meet its standards. This ensures that the financial industry operates in a way that is fair and transparent and works in the best interest of consumers.

To put it simply, the FCA is the financial industry's protector in the United Kingdom. It ensures that financial institutions follow regulations, thereby safeguarding your funds and guaranteeing that you receive fair treatment.

What Does the FCA Do? 

Why is the FCA Important? 

Without the FCA, financial corporations would only care about their own profits, allowing them to form monopolies that would harm the economy, and there would be no way to prevent these companies from offering low-quality services and products to their customers in order to minimize costs. Therefore, the UK government has mandated FCA the responsibility of protecting customers and markets, under the 2012 Financial Services Act. To achieve its fundamental task, FCA has three operational objectives:

• Ensuring that consumers are protected by providing an appropriate level of safety and security.
• Safeguarding and enhancing the integrity of UK markets and financial systems.
• Promoting effective competition to benefit consumers.

In order to achieve these objectives, they work in close collaboration with various stakeholders, including consumer groups, industry bodies, professional organizations, EU legislators, and more. By engaging with these groups, they are able to ensure that its objectives are aligned with the needs of the financial services industry and the broader public.

The FCA has the following powers:

• Examining organizations or individuals, 
• Banning products or services for up to one year, while conducting an investigation and considering a permanent ban. 
  
• Authorizing businesses that meet the requirements so that potential customers know they operate fairly and are regulated
  
• To play a supervisory role with banks and authorized payment institutions to monitor healthy competition and detect risks early. 

The FCA also has a handbook on its rules and regulations that related parties can use as a reference in their financial activity. The FCA Handbook contains detailed information on the following general aspects:

• Compliance and obligations 
• Related markets, organizations, jurisdictions, and companies 
  
• Regulatory activities and processes 
  
• Financial products and services 
• FCA threshold conditions
• Controllers and roles of many titles like CRO, CEO, Auditors, etc. 

Anti-Money Laundering Regulations of the Financial Conduct Authority (FCA)

In 2020, comprehensive changes to the Government’s Anti-Money Laundering Regulations (AML) came into force. These have brought the UK’s AML administration into line with international standards set by the Financial Action Task Force (FATF) and aligned with the EU’s 5th Money Laundering Directive (5AMLD). Under these regulations, financial institutions must perform risk assessments and due diligence procedures to prevent money laundering and other financial crimes. The FCA also requires organizations to closely follow its AML regulations to ensure that they are operating in a fair and transparent manner.

The FCA's AML regulations are designed to protect customers, staff, and shareholders while also maintaining trust in the UK as a significant global financial center. By preventing money laundering and other financial crimes, they can help maintain the integrity of financial markets and promote confidence in the financial system.

Which Industries are Regulated by FCA? 

Banking Sector 

The Financial Services Act 2012 established a new system regulating financial services to protect and develop the UK economy. Some topics that FCA covers for banking sector are:

• Information needs to be provided to banking customers, including relevant information and statements of account
• Post-sale and cancellation requirements for preventing customer harm.
  
• Unique laws regulating the rights and duties of payment service providers.

Mutual Communities

• There are over 10,000 mutual societies in the UK, and the FCA is responsible for the following: 
• Maintaining public records 
  
• Registration of new mutual communities 
  
• Receiving annual returns 

Investment Sector

The investment industry encompasses all investment firms and entities that make investments in enterprises. Investing in FCA-authorized firms provides various benefits. Investors can have greater confidence in the trustworthy and genuine nature of these companies, lowering the risk of their investments. By considering FCA Authorization as a primary criterion when selecting investment alternatives, investors can achieve their financial objectives.

Cryptocurrency Sector

Following the FCA's decision on October 8, 2023, cryptocurrency firms that want to do business in the UK must register with the FCA under the Money Laundering Reporting Officers (MLRs), unless their financial promotions are approved by an authorized person. Even businesses that are registered with the FCA for other services will need a separate FCA registration if they intend to provide relevant crypto asset services. 

As the cryptocurrency market is still relatively new, it is largely unregulated in the UK. Even Binance, one of the world's largest cryptocurrency exchanges, has failed to get authorized by the FCA to operate its business after failing to comply with regulators' rules last year. Therefore, unlike other sectors that protect customers with rights such as refunds, the FCA does not provide any responsibility for cryptocurrency-related asset losses from scams and other activities.

FCA Register 

UK legislation requires all financial firms to comply with FCA standards when conducting financial activities. The FCA Register provides a database of companies, individuals, and employees engaged in financial activities, along with their regulations, activity areas, and permissions provided by the FCA. This ensures that clients can be confident that they are dealing with legitimate and trustworthy organizations.

Using the FCA register search, you can find companies that are currently or have been authorized by the Financial Conduct Authority. In addition, the FCA Register enables users to locate financial services such as pensions, mortgages, and investments based on their geographic location. The system also provides links to organizations that offer transparent information about specific sectors such as banking, insurance, limited companies, and financial advice providers.

How To Get Authorized by FCA? 

 FCA expresses its confirmation criteria for industry guidance as follows: 

• It is not enough to comply with the regulations to be granted industry guidance. FCA also expects to see the links between the guidance and its rules. 
• Companies or individuals working with the B2C business model must satisfy consumer needs by protecting this regulatory system. FCA prefers to see this in an application.   
  
• They expect guidance not to clash with third parties’ interests and rights as the regulations also do not affect them.
  
• Mentioning the related area and company information is one of the other necessary principles. Also, a guide must be reachable to everyone without any cost. 
  

Also, it might be beneficial to know about the confirmation process. FCA traces a pathway during the confirmation process: 

• Industry guidance must state a clear, transparent working field in which the company or applicant individual is involved so that FCA examines its requirements correctly. 
• Examination of previous applications and guidance, which is confirmed, might be helpful if there is a similar one in terms of the working field. 
  
• All industry guidance needs to meet FCA’s regulatory principles and confirmation criteria, so they must be implemented even during the drafting process. 
  
• After all the suggestions mentioned during the drafting process are applied, the last version must be shared with FCA. 
  
• If an applicant wants to make changes in confirmed guidance, there is a certain period of time to appeal, as three months before the expiration of the guidance. 
  
• Confirmed industry guidance is valid for three years. 
  
• FCA shares all confirmed industry guidance on its website via a link from the provider. 
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