Regulators worldwide have ramped up enforcement actions at unprecedented levels in the latter half of this year, with historic fines and new precedents being established across the various sectors.
According to the latest enforcement data from RegTech consolidator, Corlytics, the total value of enforcement penalties in the third quarter of 2024 is up by 300% compared to the same quarter last year. These figures reflect the US regulators’ willingness to impose significant fines on firms, including emerging crypto firms. “This is a trend we expect to see continuing in future,” Susie MacKenzie, Head of Legal and Regulatory Analysis at Corlytics tells RegTech Insight.Corlytics has been tracking enforcement actions and regulatory updates since its inception in 2013 providing a unique window into regulatory trends across multiple sectors.
Historic Fines and ‘Enforcement Firsts’
In the cryptocurrency markets, the Commodity Futures Trading Commission (CFTC) secured a landmark $12.7 billion judgment against FTX and Alameda. This ruling represents a pivotal shift toward greater accountability in cryptocurrency markets, emphasizing that fundamental regulatory tools—such as governance, customer protections, and surveillance—are non-negotiable, even in emerging industries.
In the United States, recordkeeping failures remain a major enforcement focus. Regulators are particularly concerned about the use of off-channel communications platforms like WhatsApp. Fines have been imposed on credit rating agencies, broker-dealers, and investment advisers, highlighting the risks associated with non-compliant communication practices, and as of September 30, 2024, the Securities and Exchange Commission (SEC) has imposed approximately $2.7 billion in fines and penalties on firms for off-channel record-keeping violations since 2021.
The SEC announced the first enforcement action against a registered investment adviser (RIA) with no ties to a broker-dealer for failures in communications surveillance and record keeping practices, a move clearly influenced by a broader, ongoing, enforcement sweep of large RIAs regarding their electronic communications practices.
The Consumer Financial Protection Bureau’s (CFPB) $20 million fine against TD Bank earlier this year for providing inaccurate information to credit reporting agencies was dwarfed by the $3 billion in collective fines and penalties imposed by Financial Crimes Enforcement Network ( FinCEN), Office of the Comptroller of the Currency (OCC) and other regulators for failing to maintain adequate anti money laundering(AML) controls over several years.
In another enforcement-first the UK’s Financial Conduct Authority (FCA) imposed its first-ever fine on an audit firm, holding PwC accountable for failing to report concerns about potential fraud at London Capital & Finance. This action sets a new precedent, indicating that auditors are now firmly within the regulatory spotlight.
In another first, the Australian Securities and Investments Commission (ASIC) levied a £11.3 million penalty against Mercer Superannuation in its inaugural greenwashing case. This move signals an intensified focus on environmental claims and the integrity of ESG representations.
Regulatory Expectations and Shifting Strategies
The SEC has underscored the significance of cooperation and self-reporting in enforcement actions. Firms that proactively disclose violations and cooperate with investigations may benefit from lighter penalties. This approach encourages a culture of transparency and accountability within organizations.
While US regulators aggressively target recordkeeping failures, UK regulators have yet to take similar actions. However, firms in the UK are being reminded of their recordkeeping obligations, especially given the rise of remote work and mobile app usage, which introduce new compliance risks.
The surge in enforcement actions signals a period of elevated compliance risks. Firms must recognize that regulators are not hesitant to impose significant penalties, including unprecedented fines and enforcement measures.
“This changing environment shows how important proactive compliance measures are. Firms should invest in robust compliance programs, regular audits, and employee training to mitigate risks,” says MacKenzie.
This latest round of regulatory actions serves as a stark reminder that compliance is not merely a box-ticking exercise but a critical component of organization and culture. Senior executives must take decisive actions to continually assess and strengthen compliance frameworks, leverage technology, and foster an environment where proactive compliance is ingrained in every aspect of operations. Executives should also anticipate increased cooperation among regulators and be prepared for more coordinated enforcement strategies across jurisdictions.
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