FCA's 2026 Compliance Shake-Up

Unknown Speaker

Right, Rachel, let's start with what feels like, I dunno, the compliance equivalent of finally tidying out a cluttered loft—FCA’s new take on complaints reporting coming in 2026! Long overdue, isn't it?

Rachel MacRae

Oh, totally, Vicky. It's like, after years of having with five different returns depending on sector— DISP, CCR, CMC, PSR, and Funeral Plans—suddenly it's, "Let's have just the one." I stared at that update and thought, what have I missed? Less admin, they say. I’m still in shock. Is this really happening?

Unknown Speaker

No, I know! Fewer boxes to tick, fewer times you find yourself thinking, “Why am I filling this in? Does it even apply to us?” The new permission-based fields alone will save hours—only answering the bits relevant to your permissions. Imagine not duplicating effort for once!

Rachel MacRae

That’s almost revolutionary for us, isn’t it? And the nil return—finally, if you’ve got no complaints in a period, just tick and move on. No more wasted time on those ghost returns. My inner admin-nerd's very happy about that. But I guess, for bigger groups, the days of group-level reporting are over. Now it’s by legal entity only, which means proper accountability for each reporting firm.

Unknown Speaker

Yeah, that’ll sort out who’s doing what, no more hiding behind the parent company. Actually, the new taxonomy is a big deal too—more up-to-date categories, so you’re not shoving everything awkward into “Other.”

Rachel MacRae

And you know, Vicky, the vulnerability reporting’s going to be a change. If a complaint involves someone vulnerable, or if poor handling of vulnerability was the trigger, you’ve got to flag it. Makes you think how closely tied complaints handling is to Consumer Duty and our processes for identifying vulnerable clients. It's more nuanced than ever, especially for advice firms. Might only get a handful of complaints, but they need handling with even more care.

Unknown Speaker

Absolutely. And let’s not forget—fixed dates now, every six months. Everyone’s on the same timetable, reporting by calendar year, January to June and July to December. Much less confusion when you’re benchmarking or trying to spot trends. I mean, they’re even promising clearer definitions and worked examples this time, which if you ask me, should save half the arguments compliance teams have every review cycle.

Rachel MacRae

That’ll be a miracle! And the FCA’s only publishing public data for firms with over 500 complaints per period. So, smaller advice firms might breathe a sigh of relief about less public scrutiny, but still get better benchmarking from the data—that’s a win. But don’t sit back; the first submissions are expected from July 2026 covering January to June. Now’s the time to start prepping—double-check your categories, how your systems capture vulnerability, update procedures, and make sure your teams know what’s what.

Unknown Speaker

Yep, and training’s never a once-and-done. Keep those skills sharp. Actually, we talked in a previous episode about the dangers of just ticking boxes without proper checks, especially with data quality in reporting—this is another push from the FCA to get it right, not just done.

Rachel MacRae

Exactly, and if you haven’t seen the new template in the annex, get onto it! Prep now, not April 2026 when you’re scrambling. No one wants to be that firm. Shall we look at what's next on the regulatory shake-up list?

Rachel MacRae

Right, so fresh from the FCA’s inbox—regulating ESG ratings providers! This got me genuinely excited, Vicky. Ratings that steer billions of pounds have—up to now—been totally unregulated. Madness, right?

Unknown Speaker

It’s about time, honestly. With some clients asking about “green” investments, you really need to know that what you’re being told has some substance to it. The regulator finally wants ESG ratings providers to be transparent—clear info on how they get their ratings, what data they’re using, and how often they’re updating things.

Rachel MacRae

Yep, transparency top of the list. Plus, they’re bringing in proper governance and controls, so these providers actually have to check the quality of their data and keep conflicts of interest in check. You know, like if a provider is selling consulting too—no more marking your own homework, basically.

Unknown Speaker

Ha! Good point. I mean, I’m not sure how often advice firms are dealing direct with ESG providers themselves, but if you’re relying on these ratings to pick funds or build your client portfolios, pretty soon you’ll be asking the question—are we using a regulated provider, or not? Because that’s going to matter for Consumer Duty, for your own due diligence, and if you want to steer clear of greenwashing accusations. Feels a bit like the FCA’s approach with investment research in MiFID—only this is about keeping sustainability claims legit.

Rachel MacRae

Exactly, aligns with what we said before on Consumer Duty and making sure clients aren’t misled—especially when investments are being promoted as sustainable or “green.” Plus, the new rules add SMCR-style responsibility, so senior managers at ESG ratings firms will be accountable and, there will be complaints and engagement processes—so if a fund manager disagrees with a rating, there’s an actual route to challenge it.

Unknown Speaker

Yeah, and let’s not forget authorisation itself. Only accredited ESG ratings providers can serve the UK market, though there are some carve-outs for in-house ratings or where it’s just part of broader research. I do wonder how many firms realise they’ll be affected. It’s early days and the FCA is taking feedback till March 2026—but it’s something advisers will need on their radar. The themes all tie back to that big push for transparency, clear controls and not letting marketing get ahead of reality. Building on that, shall we get into what’s happening with AML supervision and AI? They’re not slowing down, are they?

Unknown Speaker

No rest for the compliant, eh? So the FCA’s just censured the Institute of Certified Bookkeepers for, let’s be honest, taking their eye off the ball with AML. Nine months with no inspections—neither in person nor virtual! You’d think that was a typo. But, it sends a big signal: even supervisors are now being supervised, and “delegated” AML frameworks aren’t an excuse for cutting corners.

Rachel MacRae

It’s a huge message to anyone relying on third-party frameworks, isn’t it? Networks, umbrella firms—if you outsource any part of AML, make sure it’s watertight. We’ve chatted before about how AML can’t just be a box-ticking exercise, and this censure proves the FCA’s not messing around with standards at any level.

Unknown Speaker

And, with the Consumer Duty and SMCR underpinning everything, risk management’s really under the microscope. The FCA’s making it clear: oversight of AML frameworks and regular reviews can’t just sit on the to-do list. It’s got to actually happen, and be evidenced. Firms need to be confident—not just hopeful—that what’s in place is working in practice, not just on paper.

Rachel MacRae

Exactly. Now, on a totally different but actually kind of related note—AI Live Testing! This is the flashy bit: FCA letting firms like Monzo, NatWest, Santander and Scottish Widows try out real-world AI tools for stuff like triaging advice, streamlining complaints handling, even AI-driven debt resolution tools.

Unknown Speaker

It’s fascinating, isn’t it? And it’s not science fiction, it's rolling out already. Advisors might not be developing the tech themselves, but these tools are coming our way—AI that helps with suitability reports, picks up on financial vulnerability, maybe even offers financial guidance. FCA’s hands-on, not just letting anything go—there’s oversight, governance and human accountability all the way through testing. It all links back to making sure outcomes are explainable and fair for clients.

Rachel MacRae

Yeah, and as we said in an episode a while back, whether you’re buying in an off-the-shelf AI tool or building something bespoke, you need proper governance and to review your oversight procedures for AI-driven products. Consumer Duty still applies! We’ve even loaded some AI governance resources into the B-Compliant library for those curious souls who want to get stuck in early.

Unknown Speaker

Spot on, Rachel. So, whether it’s AML supervision tightening up, or live AI trials transforming how we all work, what we’re seeing is the FCA raising the bar on oversight, clarity and fair outcomes. All things compliance, basically. Right, that’s all we’ve got time for this week—Rach, thanks for the laughs and the insights.

Rachel MacRae

My pleasure, Vicky! You know me, I could ramble on about AI and AML for hours, but let’s leave it there and pick things up next time. Thanks everyone for listening—don’t forget to check out our resources and we’ll catch you in the next episode!

Unknown Speaker

See you soon, Rach. See you everyone—keep compliant, till next time!