Firms must do more to protect consumers and prevent sanctions breaches – FCA

The Financial Conduct Authority (FCA) has called on regulated firms to raise consumer protection standards when approving financial promotions, and do more to prevent sanctions breaches.

The statements came from two separate updates, one relating to financial promotions and the other to financial and trade sanctions.

In a review, the FCA found that some firms that approve financial promotions should be doing more to protect consumers.

While the strongest firms were applying the Consumer Duty from the start of their processes, others had approved adverts with unsubstantiated claims or allowed retail investors to see promotions intended for professional clients.

In some cases, firms relied on third-party templates instead of doing proper checks themselves.

“Consumers see these promotions daily - in social media feeds, online adverts, websites and apps,” said FCA director of consumer investments, Lucy Castledine.

“When approvers fail in their responsibilities, people can be misled into harmful financial decisions.

“Firms must make sure every promotion they sign off is fair, clear and not misleading.”

In a separate statement, the FCA said that while financial firms have made progress in preventing sanctions breaches, gaps remained.

Its latest review of firms’ sanctions systems and controls found repeated examples of firms exhibiting strong controls and identifying potential sanctions breaches before they occurred.

However, firms faced challenges in detecting and preventing specific trade sanction breaches, with the most common root causes of reported sanction breaches being weaknesses in due diligence, alert management, transaction and name screening, as well as the management of frozen assets and compliance with licences.

The regulator is sharing good and poor practice it identified to help firms strengthen their sanctions controls.

The FCA has signed a Memorandum of Understanding with the Office of Financial Sanctions Implementation, setting out arrangements for cooperation and the sharing of intelligence between the two organisations.

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