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Consumer Compliance UK

Did you know the pandemic is both forcing and encouraging more people, especially older adults, to buy tech and learn about tech?

Indeed, many have adopted tech apps, platforms, and other digital services and products to help them with their remote or hybrid work, as well as better satisfy their ready appetite for entertainment and news information.

Dubbed as a “Tech-celeration,” observers note that consumers in the UK are becoming more sophisticated and tech-savvy about digital products and services, and are spending more time with them in both their leisure and work hours, a Forrester analysis found.

When it comes to financial services, UK consumers are also spending more time learning about FinTech—digital technologies centred on banking and money—and other digital options that offer the promise of a comfortable present and future, an eMarketer report revealed.

“Many people’s eyes have been opened by this pandemic to what technology can do for their lives: to keep them connected; and work from home; and keep their family fed, clean, entertained, and the like,” said Alex Baldock, chief executive of electrical goods retailer Dixons Carphone, to the BBC Today in mid-2021.

He asserted the change would be “permanent” and “structural”.

What does this mean for UK corporate governance, risk management, and compliance?

digitalization UK compliance

What Digitalization Meant for Consumer Behaviour and Compliance in the UK

It can be argued that long-term digitalization both expands the financial pie for consumers and frees up their time significantly, which stimulates the economy as citizens of the UK turn to spend their newly gained hours on either productive work or enjoyable leisure. As a result, spending increases.

Compliance must evolve in line with this, noted Martin Schofield, the Director of Financial Crime and Forensics Unit at UK’s Complyport. “As products and services have become… more complex, greater in number and, of course, more accessible to the consumer, so the need for compliance has grown, too.”

It’s worthwhile to take stock of how digitalization and technology has transformed people’s relationships with money as well as their understanding of it, Schofield commented.

Back in the day, during the 1990s for instance, he explained, consumers went to specialists for any kind of help:

  • – If you wanted to bank a cheque, you went to your bank.
  • – If you wanted to pay a bill, you went to your bank.
  • – If you wanted foreign currency, you either went to your bank or a bureau de change.
  • – If you took money abroad, it would usually be in the form of travellers cheques.
  • – If you wanted to book a holiday, you went to a travel agent.

We lived in a limited world, Schofield said, when today, all of the above tasks can be achieved simply by using your mobile phone.

“With such a limited, or simpler access to financial services and products, it can be argued that compliance was simpler, too. Consequently, compliance was not something that was so known to the consumer; it wasn’t something that the public at large had any real experience or knowledge of, as it was, to a larger degree, left in the hands of the professionals,” Schofield told us.

“With [yesteryear’s] access to products and services mainly having only one route, via a professional, possibly the view was taken, in genuine belief, that compliance was for the professionals only, the brokers, the advisers, the bank managers, etc.,” he added.

“They made sure everything was as it should be, and the public’s faith was placed here. After all, generally speaking, what experience of all things financial did the average person on the street have in, say, the 1990s?”

Schofield added: When the global financial crisis of 2008-09 struck, however, and claims of financial mishandling multiplied (mortgage endowment complaints, for example), did the consumer realise that they had to assume some responsibility for their finances and money, and understand the world of finance and compliance a little better?

“Pressure from this evolving consumer awareness [translated to] the need for stronger and better compliance and a [compliance officer] present, willing, and empowered to enforce it,” he noted.

Brexit and Compliance in the UK

In the years since the global financial crisis, sincere measures have been taken to fortify regulations and compliance programmes in the UK, as noted in one of our recent blog posts here.

Brexit doesn’t necessarily impact the regulatory regime, said Schofield, since the job of the compliance officer is to simply enforce and implement the rules.

“If the rules are to be written, does it make any real difference who writes them – London or Brussels? On one hand, no, the rules are there and the UK as an EU member state has always followed them up until Brexit. After Brexit – we are and shall continue writing our own.”

In other words, all compliance officers in the UK are ready and standing by to implement any new post-Brexit regulations rolled out by the UK government.

However, according to UK-based Samantha J. Sheen, Director of Ex Ante Advisory Ltd., “the promised changes [of Brexit] have not been made yet for a number of reasons [such as] policy, politics, the pandemic, etc.”

“From an Anti-Money Laundering (AML) perspective, we’ve responded to consultations and are having Parliamentary Committee meetings, but they are not focused on Brexit for AML, they are focused on how to better fight crime in the UK,” she commented to the IGCA.

Similarly, David Symes, the Managing Director at Compliance Recruitment Solutions in the UK, told IGCA, “it will take a  long time for the UK to build its own independent regulatory structure, especially as a lot of what was put in place was in fact good practise regarding protecting customers and allowing markets to operate fairly.”

However, one major downside of this eventual shift, Symes said, would be “that if already overworked Compliance Officers are faced with a deluge of regulatory change to both analyse for management and later implement in practical terms through documentation, procedure, and training, then this may lead to staffing issues.”

UK AML CFT Anti-Fraud

On Present Anti-Fraud, AML and CFT Measures in the UK

A UK government policy paper on the Economic Crime Plan (2019 to 2022) ranks fraud as one of the most common crimes in the country, with one in fifteen people victimized by the crime yearly.

However, an internal 2021 government assessment by the Financial Action Task Force (FATF) found that the UK has one of the toughest systems for countering financial terrorism (CFT) and money laundering of over 60 countries it assessed.

Despite this stunning achievement, the UK still intends to do better by significantly beefing up financial crime prevention measures, in light of a noted rise in financial crimes during the pandemic. In late September 2021, the UK government reported that £753.9 million was stolen through fraud in the first half of 2021, an increase of 30% compared to the same period in 2020.

Significant fraud during this period was traced to increased phishing attacks of personal information and passwords linked to the Covid-19 vaccine rollout, the report found.

A New UK Financial Crime Measure: An Example

One example of a tough governmental measure against financial crime is the introduction of a secure UK digital identity and attributes trust framework that ultimately circumvents the need for a physical national identity card.

Essentially, the government aims to create a clear set of rules on what ‘good’ digital identities look like, erect a governance and oversight function to back the same rules, and develop proposals to remove regulatory and legislative blocks to the use of secure digital identities.

The framework, attests Matt Warman MP, UK Minister of Digital Infrastructure, fortifies Know Your Client (KYC) practices.

This framework is just one of multiple measures the UK is developing to further check financial fraud and crime in the country and signals a ready will and intent to sincerely combat financial crimes, fraud, and terrorism with fervour, as Britons do deeply recognize it as a problem.

All in all, the UK is leading the world on how to combat financial crime successfully and is presently tackling the issue by the horns of the bull.

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