Compliance Updater - August 2024

A summary of key compliance stories from around the globe in August.

1. UK regulator reports on fraud reimbursement rates.
2. FCA chair reveals the identity of a whistleblower.
3. SEC reveals $393m settlement over staff messaging on platforms.
4. Franklin Templeton puts its top bond investor on leave.
5. FCA reaches agreement with H20 to pay investors €250m.
6. FCA censures firm over audit of client asset reports.
7. Two oil executives handed jail terms over 1MDB.
8. FCA set to probe protection products.
9. Compliance officer sacked over whistleblowing wins an award at tribunal.

UK regulator reports on fraud reimbursement rates.

The UK’s Payments Systems Regulator released figures on the performance of payment firms in tackling authorised push payment (APP) scams and reimbursing victims in 2023. The year saw 252k cases of APP scams totalling £341m. Under the current voluntary reimbursement scheme, 67% of money lost was reimbursed. Some smaller banks’ reimbursement rates significantly lagged those of the larger banks. The regulator is consulting on new regulatory requirements which will come into effect on 7 October 2024. An initial plan to make reimbursement mandatory for claims up to £415,000 was reduced to £85,000 under pressure from smaller fintech firms.

FCA chair reveals the identity of a whistleblower.

The chairman of the UK’s Financial Conduct Authority (FCA), Ashley Alder, was accused of breaching the regulator’s code of conduct by forwarding emails revealing a whistleblower’s identity to others. A senior independent director is reviewing the incident.

SEC reveals $393m settlement over staff messaging on platforms.

The US Securities and Exchange Commission (SEC) agreed a settlement with 26 Wall Street firms including Ameriprise and Edward Jones that will see the firms pay $393m to settle charges over staff inappropriately messaging on platforms like WhatsApp for business purposes.

Franklin Templeton puts its top bond investor on leave.

Asset manager Franklin Templeton put its top bond investor, Ken Leech, on leave and disclosed that regulators were investigating charging him for suspicious trading. Franklin Templeton’s shares fell 12.5% in response to the news.

FCA reaches agreement with H20 to pay investors €250m.

H20, the asset management firm, agreed with the UK’s FCA to pay €250m to investors to avoid a fine from the regulator for its “serious” failings. H20 managed more than €30bn at its peak but, according to the FCA, it failed to carry out proper due diligence on its investments and did not declare hospitality including the use of a superyacht and a private jet. To avoid a fine, the regulator agreed that the firm pays €250m to investors who have had money trapped in H20 funds for years.

FCA censures firm over audit of client asset reports.

The UK’s FCA censured MHA, an auditing unit within professional services firm Baker Tilly, for failing to adequately prepare client asset reports. MHA failed to produce four client asset reports to the required standards between 2015 and 2019 for two regulated firms and did not notify the regulator of 25 breaches by the firms audited.

Two oil executives handed jail terms over 1MDB.

A Swiss court sentenced two former PetroSaudi oil executives over their roles in the collapsed Malaysian sovereign fund 1MDB. The two were found to have embezzled $1.8bn from 1MDB and found guilty of more than 600 acts of money laundering. The jail sentences were for six and seven years.

FCA set to probe protection products.

The UK’s FCA announced that it is launching a study into pure protection insurance products. The probe will look at concerns about the level of commissions paid to intermediaries and assess whether consumers are getting “fair value”.

Compliance officer sacked over whistleblowing wins an award at tribunal.

A former compliance officer at a UK foreign exchange brokerage was sacked by his employer after raising allegations of money laundering and Chinese espionage with the FCA. He won a claim for unfair dismissal and was awarded more than £560k at a tribunal in London.