You don't need us to tell you it’s been a year for surprises.
Referenda in the UK and Italy, coupled with the result of the US election, have created huge uncertainty and widespread anxiety among businesses.
While we ponder what Brexit really means, one thing everyone wants on their New Year’s wish list is more certainty and less risk.
As far as regulation goes, there are six key themes every financial institution needs to look out for in 2017.
And unlike so many other things in the world at present, we’ve made sure nothing is open to interpretation.
Getting tough on tax evasion
The government is taking its crackdown on tax evasion one step further. With the introduction of a new criminal offence for corporates who fail to prevent the facilitation of tax evasion, anyone representing a business that breaches tax laws could leave the whole company liable.
To prevent this, your business needs to be able to show it has “reasonable” procedures in place. Ultimately, however, it will be up to the courts to determine if the prevention procedures are “reasonable”.
Mind the (gender pay) gap
Gender pay gap reporting may well become compulsory for large employers as soon as April 2017. To avoid being named and shamed, businesses need to review their pay data and go through the necessary steps to limit the gaps.
As the pay gap in financial services at 39.5 per cent is more than double the national average, we believe the issue is likely to take much longer than many businesses expect.
This time it’s personal
Responsibility for regulatory compliance now lies primarily with senior managers, and financial services regulators are becoming increasingly determined to bring cases against them – sometimes even instead of cases against firms.
To stay ahead of the game, all senior managers would be well advised to carry out regular assessments of their risk management framework. If an issue does come up, the quicker and more decisive the action the better, and all the responsive steps should be recorded accordingly.
EU – UK = No more GDPR?
Early 2016 saw many companies preparing for the new General Data Protection Regulation (GDPR). This comes into force in March 2018 and includes fines reaching up to 4 per cent of annual turnover for breaches.
There was hope from many businesses that the Brexit vote spelled the end for GDPR. That’s not the case. Even if the UK exits the EU before 2019, companies will still have to comply, even if only in the short term.
Companies that want to deal with the rest of the EU will have to play by the rules (GDPR included).
With the 2018 implementation date looming, firms still have a lot to do and must not forget that the EU’s gold standard is something customers trust.
Next-gen corporate governance
Corporate governance needs to be recognised as a regulatory issue for financial services firms. For banks, this does not stop with implementing the Senior Managers Regime; it involves revisiting their Management Responsibilities Maps and Statements of Responsibilities to ensure they reflect the reality on the ground.
This regulatory focus could catch firms off guard; their management should be aware of this new regulatory focus.
Get on board with “on notice” letters
If a financial institution is suspected of breaching competition law, the FCA now makes widespread use of one of its “soft” regulatory tools – the so-called “on notice” letter. These letters alert the firm to the possibility that a competition law breach has occurred, putting the onus on the firm to identify any additional steps necessary for compliance and to convince the FCA there is no need for further investigation.
With competition law infringement penalties representing up to 10 per cent of a company’s annual global turnover, businesses receiving such letters need to act swiftly to protect their positions.
Nathan Willmott and Polly James are partners at Berwin Leighton Paisner.