SM&CR Reforms, Redress Overhaul, and AML Fines

Unknown Speaker

Hello and welcome back to the B-Compliant Podcast! I’m Vicky Pearce, and as always, I’m joined by Rachel MacRae. Rach, how are you doing today?

Rachel MacRae

Oh, I’m great, Vicky! I’m ready to dive into some regulatory reform. I know, I know, not everyone’s idea of a good time, but you know me—I love a good consultation paper.

Unknown Speaker

Don't we all! and this week’s a big one. We’re starting with the FCA’s Consultation Paper CP25/21, which is all about proposed changes to the Senior Managers & Certification Regime—SMCR for short. Now, this is something we’ve touched on in previous episodes, but the FCA’s really putting it under the microscope this time.

Rachel MacRae

Yeah, and it’s not just a tweak here or there. They’re looking at clarifying and extending the 12-week rule, streamlining the SMF approval process, and even reducing how often firms have to submit their Statement of Responsibilities. I mean, that’s music to the ears of anyone who’s ever had to chase down a director for a signature, right?

Unknown Speaker

Absolutely. And I think what’s interesting is that the FCA’s saying, look, we want to keep the core principles—individual accountability, strong governance—but we also hear you on the admin burden. So, for example, extending the validity of criminal record checks, and raising the thresholds for becoming an Enhanced SMCR firm. That could mean fewer firms caught by the most onerous requirements.

Rachel MacRae

Yeah, and I think that’s a big deal for smaller firms, especially. We’ve talked before about how the regime can feel a bit heavy-handed if you’re not a big firm. But Vicky, what do you make of the idea of streamlining? Do you think it’s going to make life easier for compliance teams, or is it just moving the paperwork around?

Unknown Speaker

I think it’s a bit of both, to be honest. There’s always a risk that “streamlining” just means the same amount of work, but in a different format. But if they genuinely look at the regime and make the process less of a slog, that’s a win. And, you know, the idea of a second phase—maybe even scrapping the Directory or revising the Certification Regime—that could be quite radical if it happens.

Rachel MacRae

Yeah, and I suppose the key is, as always, engagement. The FCA’s asking for feedback by October, so if you’ve got strong views, now’s the time to make them heard. And don’t forget, the PRA’s running a parallel consultation, so you really need to look at both if you’re in scope.

Unknown Speaker

Exactly. And just to wrap up this bit, the final rules are expected in mid-2026, so there’s time to get your head around it. But don’t leave it to the last minute—start thinking about how these changes could affect your firm now.

Rachel MacRae

Right, let’s move on to the next big consultation—CP25/22. This one’s all about redress reforms, and it’s a joint effort between the FCA and the Financial Ombudsman Service. They’re basically saying, “Let’s modernise the whole complaints system.”

Unknown Speaker

Yeah, and it’s not just about making things easier for firms, is it? They want a system that’s more predictable and efficient for consumers too. One of the headline proposals is the introduction of a 10-year ‘longstop’ for complaints. So, after 10 years, with a few exceptions, that’s it—no more complaints about that issue which is huge, because at the moment, some complaints can just hang over firms for what feels like forever. And they’re also talking about clearer expectations for firms to identify and report harm, especially when it comes to Mass Redress Events. So, if there’s a systemic issue, you can’t just hope it goes away—you’ve got to report it and deal with it.

Rachel MacRae

Yeah, and I think that’s a real shift. We’ve seen in the past how slow responses to mass redress events can make things worse for everyone—firms, consumers, the regulator. The new criteria for identifying these events and the tools to manage them could make a big difference.

Unknown Speaker

yes it could! And the new fee structures for complaints brought by professional representatives—hopefully that’ll cut down on the more frivolous or bulk submissions. It’s all about making the system fairer and more proportionate, isn’t it?

Rachel MacRae

Yeah, and I think it’s worth saying, this is a real opportunity for firms to shape how complaints and redress are handled in the future. The consultation’s open until October, so if you’ve got war stories—or just strong opinions—get them in. It could really change the landscape for everyone.

Unknown Speaker

Definitely. And, you know, as we’ve said in previous episodes, the FCA’s moving towards more proactive, data-driven regulation. This is another step in that direction—firms need to be on the front foot, not just waiting for the next complaint to land.

Rachel MacRae

Alright, let’s talk about authorisations and enforcement. The FCA’s announced new measures to speed up the authorisations process for firms and individuals, aiming to support growth and competitiveness in the UK financial sector. From January 2026, we’re looking at shorter statutory deadlines—four months for new firm authorisations, down from six, and two months for Senior Managers Regime applications, instead of three.

Unknown Speaker

Yeah, apparently they’re aiming to process at least half of SMR applications within 35 days, which I think is pretty ambitious. Plus, they’re digitising forms and improving communication, so hopefully, no more chasing lost paperwork or waiting months for a simple update. Apparently, the stats currently state that 99% of applications are resolved within the statutory timelines, but we know that this is only for applications that the FCA deem complete on submission, and they will happily deem an application incomplete if they can't find a document as part of the submission (which often is there but they can't see it!) in our experience their online system isn't the best.

Rachel MacRae

It will be interesting to see if they are able to put this one into practice, given our experience of their current application process, it could be a tall order.

Unknown Speaker

Yeah. They are saying it’s all about making the process more predictable and proportionate, but without lowering the bar for entry so watch this space.

Unknown Speaker

Right, onto recent enforcement actions, so Barclays have just been fined a combined 42 million pounds for serious shortcomings in their financial crime controls. In one case, they opened a client money account for WealthTek without even checking if they were authorised to hold client money. You couldn't make it up!

Rachel MacRae

You really couldn't! And then there was the Stunt & Co case—Barclays didn’t collect enough information or monitor the account properly, even after law enforcement got involved. It’s a reminder that speed is great, but you can’t cut corners on due diligence.

Unknown Speaker

Exactly. And now Barclays is having to do a major remediation programme to fix their AML controls. The FCA’s made it clear—financial crime is a top priority for 2025, and they’re going to keep a close eye on whether firms have robust systems in place. So, yes, faster authorisations might be coming, but the standards won't be dropping.

Rachel MacRae

And I think that’s a good note to end on—change is coming, but the fundamentals of good compliance and strong controls aren’t going anywhere. If anything, they’re more important than ever.

Unknown Speaker

Absolutely. That’s all for this episode of the B-Compliant AI Podcast. Thanks for joining us, and don’t forget to subscribe so you don’t miss our next deep dive into the world of regulation. Rachel, always a pleasure!

Rachel MacRae

Thanks, Vicky! See you next time, everyone. Bye!