Reports of suspicious transactions up 28% under new regulator

02 Sep 2014 | 11:52 am | 1 min. read

The number of suspicious transactions reported to the financial services watchdog has shot up by 28% since the FCA took over as City regulator, according to international law firm Pinsent Masons

Data obtained from the Financial Conduct Authority by Pinsent Masons shows that the number of suspicious transaction reports – often associated with suspected insider dealing – has increased from 1099 in 2012/13 to 1409 in 2013/14. 

The figures also show that there has been a 316% rise in suspicious transactions in the past five years rising from 338 in 2008/9 to 1409 in 2013/14. On average 117 suspicious transactions are now reported per month compared to 28 per month five years ago.

Reports of 'Misuse of information', the most frequently reported abuse, rose 29% under FCA supervision, from 980 reports in 2012/13 to 1267 reports in 2013/14. Reports of 'distortion and manipulation' saw a 24% increase in the same time period. 

A suspicious transaction is one in which there are reasonable grounds to suspect it might constitute market abuse, such as insider dealing or market manipulation. It has been a requirement of the Market Abuse Directive (MAD) since 2005 that firms seeing suspicious transactions must report these to the FSA/FCA so that it can review these and other similar transactions for evidence of market abuse.

Michael Ruck, a senior financial services enforcement lawyer at Pinsent Masons and formerly with the Financial Conduct Authority commented: 

“The FCA and previously the FSA definitely upped its game regarding the profile of its insider dealing and market abuse enforcement action.  The fear factor from this action and the current high profile markets investigations may be one reason to explain the rapid rise in suspicious transaction reports over the last few years.

“It may be suggested that as the markets have recovered over the past few years that there has been an increase in misconduct leading to the rise in reporting, however, firms and individuals are now far more cautious and making a suspicious transaction report affords them some peace of mind that the regulator won’t be knocking down their door early one morning following a tip-off from another source.

“The fear of non-compliance and even higher penalties now outweighs the fear of a regulator asking questions and potential enforcement action. 

“Firms need to be fully up to speed on their reporting requirements and the current approach of the regulator.” 

The FCA has vowed to continue to focus on potential financial crime risks, in line with their objectives to protect and enhance the integrity of the UK financial system and will take intensive and intrusive action where serious issues are identified.

 

Suspicious Transaction Reports (by authorised firms)

 

Apr 08- Mar 09

Apr 09 – Mar 10

Apr 10- Mar 11

Apr 11- Mar 12

Apr 12-Mar 13

Apr 13- Mar 14

 

Distortion/ manipulation

56

66

59

71

97

120

 
 

False/ misleading

10

5

11

18

18

12

 

Misuse of information

272

323

530

521

980

1267

 

Other

0

0

0

0

4

10

 

Total

338

394

600

610

1099

1409

 

 

 

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