With FCA fines soaring to a record £176 million in 2024—a staggering 230% increase from the previous year—financial firms face mounting pressure to strengthen compliance. High-profile enforcement actions underscore the regulator’s sharpened focus on governance, financial crime prevention, and consumer protection. In this article, Katharine Leaman (pictured), Advisory Board Member at Skillcast, explores the key risks firms face, the common compliance pitfalls, and the proactive steps businesses must take to mitigate regulatory scrutiny, protect their reputation, and foster a culture of ethical conduct.
In 2024, the Financial Conduct Authority (FCA), the UK’s financial watchdog, imposed a record-breaking £176 million in fines on financial firms. This marked a 230% increase from the £53.4 million imposed in 2023. With 27 enforcement actions in 2024, the FCA sent a clear message that material and/or systemic regulatory breaches will not be tolerated.
This year, the FCA has reinforced its crackdown with a landmark £9.2 million fine against the London Metal Exchange (LME), the first recognised Investment Exchange fine of its kind. This action underscores the FCA’s continued focus on the decision making by senior managers and the need for effective systems and controls to ensure orderly trading.
Beyond these immediate risks of penalties and the huge associated, but unseen, costs of remediation, regulatory breaches can also erode company culture, undermining trust and accountability both within an organisation and amongst its clients or counterparties. With the FCA sharpening its enforcement focus, businesses must continue taking proactive steps to ensure compliance and stay ahead of regulatory scrutiny, as well as fostering a culture of resilience and ethical conduct.
Key risks and what companies must do to comply
The FCA’s record fines last year highlight the serious consequences of non-compliance for financial firms. A major high street bank received the highest penalty in 2024 (£40 million), after failing to disclose key agreements with Qatari investors during 2008 capital raisings which totalled £11.8 billion. These agreements were not disclosed in announcements or documents provided to shareholders, violating listing rules and ultimately leading to the FCA’s fine. Notice just how long it takes some enforcement actions to reach a conclusion, all the while the firm is having to deal with the FCA investigation, which is not only expensive but also incredibly time consuming and distracting from daily operations.
Beyond monetary penalties, companies risk reputational damage, as regulatory breaches can shatter customer trust and investor confidence. The FCA has the authority to impose operational restrictions or bans, preventing certain activities, or in extreme cases, force firms to shut down, ceasing activities altogether. For example, in March 2025, Crispin Odey of Odey Asset Management was fined £1.8million and permanently banned from the UK financial services industry for failing to act with integrity, in regards to deliberate attempts to obstruct internal disciplinary processes and his reckless disregard for governance.
The FCA requires firms to operate with transparent customer communication, ensuring all interactions – whether in the form of marketing and sales, contract terms, risk and cost disclosures, or complaint handling – are clear, fair and not misleading. Firms must also prioritise financial crime prevention through robust anti-money laundering measures and fraud prevention systems, putting risk management frameworks in place to protect customers and their sensitive data. Failure to identify, assess, and mitigate these financial risks can result in penalisation.
The FCA’s 12 principles of business, and where firms are failing
More than £100 million worth of 2024’s fines were linked to breaches of the FCA’s 12 Principles of Business. Of these, the most common breaches included failures in management and control, where the FCA considered that nine of the top fifteen highest fines were due to poor internal management. Starling Bank Limited, for example, was fined £28.9 million for failing to implement proper financial crime controls, including inadequate sanctions screening and breaches related to high-risk accounts.
According to the FCA, many firms also failed to demonstrate skill, care, and diligence in decision-making processes, with compliance not fully embedded at every level. Another frequent issue was failing to act in the customer’s best interests, which remain a critical area of regulatory focus. Beyond regulatory penalties, this failure can significantly damage consumer trust, which is vital from long-term brand loyalty.
What firms must do to strengthen compliance
Firms that want to meet management and control standards, must establish strong governance and leadership, ensuring accountability for compliance oversight. Risk management frameworks should include regular audits, scenario planning and stress testing to detect and mitigate financial and operational risks before they escalate.
There are plenty of opportunities today for firms to leverage advanced compliance technology, such as AI-driven monitoring and data analytics, to aid the identification of anomalies, the detection and signposting of fraudulent activities, and the provision of real-time compliance tracking. However, it is vitally important that these tools adhere to the proper legal, ethical and operational standards to avoid unintended risks.
Within the top FCA fines, breaches to Principle 2 (skill, care and diligence) and Principle 6 (customers’ interests) were also recurring themes. The key lesson is that firms must ensure internal processes are robust and decision making is well informed, providing transparent and fair information to customers.
A key compliance requirement is timely complaint resolution, with firms expected to resolve complaints fairly and within the FCA’s eight-week timeframe. Weak complaint-handling procedures not only increase regulatory risks, but also fuel the reputational damage no competitive financial service provider wants to face. Clear procedures must be in place, with staff trained in complaint resolution, and firms monitoring trends to address recurring issues before they become systemic.
Looking ahead: preparing for FY 2026 and beyond
The FCA’s heightened enforcement actions in 2024 serve as a stark reminder of the growing regulatory scrutiny financial firms are facing. To mitigate risks, companies must ensure responsible governance, conduct regular audits, and implement strong risk mitigation strategies. Investing in comprehensive staff training is crucial, ensuring employees at all levels understand regulatory requirements, risk management, and best practices in compliance.
Tailored compliance training programmes can help firms reinforce best practices and ensure accountability across all levels of an organisation. By fostering a culture of transparency and proactive compliance, firms can safeguard their reputation, build customer and employee trust, and ultimately avoid costly fines. As the regulatory landscape evolves, businesses that prioritise compliance and staff training will be best positioned to navigate the challenges of 2025 and beyond.
The message from the FCA is loud and clear: compliance is not optional. Those firms that choose to take it seriously will reap the benefits far beyond just avoiding fines – these organisations ensure long-term stability and success.
