Our pick of key compliance stories this month
Metro Bank fined £16.6m for AML failings
The FCA has fined Metro Bank £16.6 million for failings in its anti-money laundering systems and controls between 2016 and 2020. Metro failed to adequately monitor around 60 million transactions, with a value of over £51 billion, for money laundering risks.
Although the bank automated its monitoring of customer transactions for potential financial crime, an error meant that transactions made on the same day the account was opened were left unchecked.
Junior staff raised the alarm in 2017 and 2018, but this “did not result in the issue being identified and fixed.” A fix was made in July 2019, but the bank did not check that all transactions were monitored until December 2020, “over four and a half years after the system was implemented.”
“Metro’s failings risked a gap being left in our defence against the criminal misuse of our financial system. Those failings went on for too long,”
Last month, the FCA fined another challenger bank, Starling Bank, £29 million for “shockingly lax” controls which left the financial system “wide open to criminals”.
Key takeaways:
- Money laundering has real-world consequences – we have a duty to protect customers and our communities from dirty money and combat financial crime
- Follow the FCA’s Principles for Business – especially Principle 3 on management and control
- Speak up, listen up and follow up – remember, speaking up only works if there’s also a ‘listen up’ and ‘follow up’ culture, and we are prepared to learn from mistakes.
Young people face age discrimination at work
Most young people (93%) have experienced negative treatment at work because of their age, a new study has found. One in four (26%) said the experience made them not want to work again.
The findings come at a time of record economic inactivity among young people, with 946,000 not in employment, education, or training (NEET).
In addition, the survey of 9,000 young people and 2,000 employers by UK Youth and KFC found:
– 81% felt undervalued at work, and 78% felt patronised
– 69% reported missing out on promotion because of their age
– 75% reported being outright rejected from a job due to their age
– 49% voiced concerns about their ability to progress in their career
Stereotypes were often at the centre of this negative treatment. Over a third of employers (34%) described young people as ‘overly sensitive’, 27% said they were ‘entitled’, and 23% called young people ‘lazy’ and ‘work-shy’.
This had a detrimental impact on young people’s self-esteem, belief and confidence. Employers were aware of the damage of using stereotypes, with 38% saying stereotypes were ‘unfair’ and 51% recognising the potential impact on young people’s mental health.
Researchers have called on employers to remove the barriers that young people face. Young people want employers to make the hiring process more inclusive (27%), listen to young people more (26%), and take mental health more seriously (26%).
Key takeaways:
- Educate your team about unconscious bias – take a test to identify your own biases
- Mind your language – use tools (such as Gender Decoder) to check the language in adverts and job descriptions for potential bias
- Broaden your job advertising and campaigns – to help attract more applications from young people. Hello, TikTok…
- Use different media and formats to create fun and engaging onboarding and inductions – with quizzes, face-to-face sessions, videos, and more. Are new recruits really going to read your policies on day one?
- Ensure recruitment and promotion decisions are fair, inclusive and made on an “objective and justifiable basis” – use panels and ‘blind’ applications to counter bias
- Consider initiatives, such as champions and reverse mentorship programmes – to promote greater collaboration and teamwork across generations.
NatWest blocks WhatsApp in crackdown
NatWest has banned staff from using WhatsApp, Skype and other ‘off-channel’ communications and blocked access to those apps on company devices in the UK.
“Like many organisations, we only permit the use of approved channels for communicating about business matters, whether internally or externally,”
Banks are required to keep records of all communications to prevent market abuse and misconduct. However, record-keeping is impossible if messages are sent via unauthorised or ephemeral messaging apps, which prevents proper scrutiny.
Since 2021, the Securities and Exchange Commission has fined Wall Street banks, including Wells Fargo, Citigroup, and Goldman Sachs, over $2 billion.
In the UK, Ofgem fined Morgan Stanley £5.4 million after energy traders used WhatsApp to discuss deals, and the PRA also censured Wyelands Bank for “poor retention of WhatsApp messages”.
WhatsApp and informal messaging apps can blur the line between work and social communications. This can facilitate inappropriate exchanges, bullying, and the unauthorised sharing of sensitive information.
Key takeaways:
- Only use approved apps when communicating with clients and colleagues – to ensure robust record-keeping
- Know company expectations – for example, are integrated third-party monitoring tools (e.g., Movius, Symphony, Smarsh) used? What messaging apps are approved by your company? What alternatives does your company recommend (e.g., messaging functions on the Bloomberg Terminal, email, etc)?
- Be proactive – if someone messages you on LinkedIn, Signal or another unauthorised channel, always move the conversation back to an approved channel
- Live your company values – it is never acceptable to share offensive or inappropriate content via WhatsApp
- Follow the ‘need to know’ principle – never share commercially sensitive information in group chats or via unauthorised channels.
Follow the Monet: Sotheby’s settles tax fraud case
Sotheby’s has agreed to pay the State of New York $6.25 million to settle a lawsuit by Attorney General Letitia James, who claimed it helped art collectors avoid taxes on high-value purchases.
According to James, Sotheby’s accepted fraudulent resale certificates from at least eight clients, allowing them to dodge millions of dollars in taxes between 2010 and 2020.
These resale certificates allowed clients to portray themselves as art dealers and falsely claim tax exemptions when they were actually art collectors purchasing for private collections.
In at least one case, Sotheby’s accepted certificates from a client who spent over $27 million on art by Anish Kapoor and Jean-Michel Basquiat, knowing he was a collector and had no intention of selling the works.
Employees encouraged clients to use fraudulent certificates, even helping them fill out the forms and display art in clients’ homes.
“No one should be allowed to cheat the system and escape paying the taxes they owe. Sotheby’s intentionally broke the law,”
In a statement, Sotheby’s said, “Sotheby’s admitted no wrongdoing in connection with today’s settlement and remains committed to full compliance with all applicable law.”
Experts sound warnings over AI voice clones
According to experts, AI voice clones are becoming so realistic that the government needs to urgently step up its regulatory efforts to prevent misuse and fraud.
David Attenborough is the latest high-profile figure to have his voice copied by fraudsters. He said that he was “profoundly disturbed” after his cloned voice was used in partisan US news reports about the US election and the Russia-Ukraine war.
He said, “Having spent a lifetime trying to speak what I believe to be the truth, I am profoundly disturbed to find that these days my identity is being stolen by others and greatly object to them using it to say what they wish”.
Experts warn that AI voice cloning is developing so quickly that our laws are inadequate and falling behind.
Dr Dominic Lees, an AI expert and advisor on a parliamentary committee, said, “Our privacy and copyright laws aren’t up to date with what this new technology presents, so there’s very little that David Attenborough can do.”
AI voice cloning scams rose 30% last year, according to research by NatWest.
“If you get a call that sounds like it’s from a friend or family member asking for money or personal info, take a pause. Hang up and give them a call back on a number you know is legitimate.”
“The government definitely needs to look at [voice cloning] because it’s a major issue for fraud. It needs the stick of government regulation in order to deter [misuse] … we can’t allow it to be a free-for-all,” said Lees.
Key takeaways:
- Don’t accept AI-generated content at face value – verify it using reliable, trusted sources.
- Be aware of the risks – for example, hallucination, misinformation, privacy and security concerns, and so on.
- Think data privacy and security – never input sensitive, personal, or proprietary information into external AI tools like ChatGPT.
- Ensure human oversight of AI-driven decisions – so disadvantaged groups are not treated unfairly or discriminated against.
- Be transparent about your use of AI – label AI-generated content and tell people when you use AI so they can make informed choices.
Regulator keeps the spotlight on ‘finfluencers’
The Financial Conduct Authority has interviewed twenty unnamed ‘finfluencers’ under caution as it continues to crack down on people who advertise financial services products illegally.
It’s also issued 38 alerts against social media accounts operated by ‘finfluencers’, which carry unlawful promotions.
‘Finfluencers’ are social media personalities with huge followings who use their platform to promote financial products and share insights and advice. However, they are not authorised by the FCA and are unqualified to give financial advice.
Under section 21 (s21) of the Financial Services and Markets Act 2000 (FSMA), a person must not communicate an invitation or inducement to engage in investment activity. Breaches of s21 are punishable by fines and/or up to two years imprisonment.
The risks are high. According to the FCA, around two-thirds of 18 to 29-year-olds follow social media influencers. 74% of those said they trusted their advice, and 9 in 10 followers had been encouraged to change their financial behaviour.
“Finfluencers are trusted by the people who follow them, often young and potentially vulnerable people attracted to the lifestyle they flaunt. Finfluencers need to check the products they promote to ensure they are not breaking the law and putting their followers’ livelihoods and life savings at risk,”
Separately, influencer turned wrestler Logan Paul is facing allegations that he promoted cryptocurrency investments to his 23 million followers without disclosing his financial interests, making a £92k profit. He denies any wrongdoing.
Meta fined €798m for tying of Facebook Marketplace
Meta has been fined €798 million by the European Commission for abuse of its dominant position and engaging in anti-competitive practices.
Tying its online classified ads Marketplace business to Facebook meant “all Facebook users automatically have access and get regularly exposed to Facebook Marketplace whether they want it or not”.
This gave Marketplace “advantages that other online classified ads service providers could not match”, said the Commission’s Margrethe Vestager. Meta plans to appeal the decision, saying it “ignores the market realities and will only serve to protect incumbent marketplaces from competition.”
It claimed that while some Facebook users choose to “engage with Marketplace, many don’t”. There is increasing competition from other online marketplaces, such as eBay and Vinted. Meta argued there was “no evidence” of harm to consumers or competitors.
Elsewhere, the US Department of Justice has ordered Google to sell its Chrome browser to end its internet search monopoly.
Car dealer is banned following GBH conviction
A car dealer has been banned from working in financial services after being convicted of grievous bodily harm (GBH).
Ari Harris was convicted of GBH after stabbing a man in July 2020 and sentenced to three years imprisonment in July 2022.
The FCA said that Harris and Reeds Motors Ltd., where he was sole director, “deliberately failed to notify the FCA of his offending, conviction and custodial sentence, despite obligations to do so. They deliberately provided false and misleading information to cover up the fact that he was in prison”.
Harris’ offending came to light when an application was made for an additional person to be authorised in October 2022. When the FCA asked why this was needed, Harris and the firm claimed it was because Harris “was overseas and looking into a business abroad”.
In another phone call with the FCA, Harris again misled the FCA, failing to mention that he was actually in prison. The FCA removed Harris’ approval to perform his senior management function, banned him from the industry and cancelled the firm’s permissions.
“These repeated efforts to conceal Mr Harris’ violent criminal conviction and incarceration clearly show a shocking lack of honesty and integrity. This ban is fully warranted.”
Teva pays €463m for abuse of dominance
Generic drugmaker Teva has been fined €463 million by Europe’s antitrust regulator for abusing its dominant position and thwarting competition to Copaxone, its multiple sclerosis medicine.
The European Commission accused Teva of artificially extending its patent protection of Copaxone and spreading misleading information about the safety and efficacy of a rival product. This hindered market entry and uptake of a competing and cheaper glatiramer acetate medicine.
“We send a clear message to dominant pharmaceutical companies that we will not tolerate the use of disparagement campaigns to foreclose competing medicines,” said the Commission’s chief, Margrethe Vestager.
“With today’s decision, the Commission contributes to keeping drugs affordable, preserving choice of treatment and fostering innovation to the benefit of EU patients and national healthcare systems,” she added.
Teva plans to challenge the decision.
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