Regulators intensified their enforcement actions in the Q32024, setting unprecedented records in the number and magnitude of penalties, according to a report from global regulatory intelligence firm Corlytics.
Among these actions, the Commodity Futures Trading Commission’s (CFTC) $12.7bn ruling against FTX and Alameda stands out as a pivotal moment for the cryptocurrency markets. This decision marks a significant move towards enhanced accountability, two years after the FTX collapse signaled the onset of a severe downturn in the cryptocurrency sector.
Corlytics’ review highlights a broad spectrum of regulatory crackdowns, not limited to the crypto industry but spanning various financial sectors. This period has seen a noticeable increase in fines, with regulators initiating pioneering enforcement actions that have established new legal precedents.
Susie MacKenzie, head of legal and regulatory analysis at Corlytics, noted the aggressive regulatory stance. “We have seen the regulators roar into action in this third quarter, not only in terms of the amount of fines imposed but also with some enforcement firsts. One action stands out for both its magnitude and profile: two years ago, the collapse of FTX sent shock waves through the crypto industry, raising fears of a prolonged ‘crypto winter.’
In August, the CFTC obtained a $12.7 billion judgment against FTX and Alameda. The CFTC identified fundamental failures, stating that ‘the basic regulatory tools, like governance, customer protections, and surveillance that exist to identify misconduct and ultimately prevent collapse, were simply not there.’”
In the US, the focus on recordkeeping failures, especially the use of unauthorised communication channels like WhatsApp, remains high on the regulatory agenda. The Securities and Exchange Commission (SEC) has underlined the benefits of cooperation and self-reporting, suggesting that these could mitigate penalties. However, similar actions from UK regulators are pending as firms are urged to adhere to stringent recordkeeping requirements amid the increase in remote working and mobile app-related compliance risks.
Consumer protection is also a primary concern in the US, demonstrated by the Consumer Financial Protection Bureau’s (CFPB) $20m fine against TD Bank. The bank was also ordered to pay over $7m in restitution for disseminating inaccurate, negative customer information to credit reporting agencies.
In the UK, the Financial Conduct Authority (FCA) issued its first-ever penalty against an audit firm. It fined PwC for failing to report potential fraud at London Capital & Finance. Additionally, the FCA fined Starling Bank nearly £30m for its “shockingly lax” financial crime controls. This marks a significant step in holding financial institutions accountable for their internal safeguards.
The Australian Securities and Investments Commission (ASIC) also took significant action by fining Mercer Superannuation £11.3m in its inaugural greenwashing case, as part of a broader crackdown on misleading environmental claims.
Mackenzie concluded, “As we continue to monitor regulatory trends, it’s clear that the SEC is intensifying its focus on senior employee conduct. This quarter, they’ve emphasised the importance of self-reporting and cooperation, stating that these actions may lead to significantly reduced penalties. In light of ongoing enforcement, particularly around recordkeeping failures due to off-channel communications, firms must remain vigilant. This changing environment shows how important proactive compliance measures are.”
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