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Financial Crime is broadly any criminal conduct relating to money or financial services, including, for example, fraud, money laundering, the misuse of information (such as insider trading), bribery and corruption, handling the proceeds of crime, financing terrorism, or cybercrime. In the UK, at least £2.35 billion was lost to fraud and cybercrime in 2021, according to the UK’s Action Fraud.

The PIMFA Financial Crime Committee facilitates discussion across all financial crime matters of significance, ensuring that member firms are kept fully informed and compliant with legislative and regulatory developments and are provided with the latest intelligence, approaches and tools to combat financial crime effectively. 

The FCA have published their observations on trade by organised crime groups (OCGs), advising firms on how they can mitigate the risks of being used to facilitate their trade:

Suspicious trading by members of OCGs form a significant component of the overall volume of suspicious trading in equity markets and the FCA have outlined actions that are characteristic of the activity of OCGs, for example:

  • a pattern of trading before merger and acquisition (M&A) announcements, and before press speculation about M&A.
  • the use of intermediaries who broker inside information.
  • using umbrella accounts at overseas broking firms without equivalent standards of safeguards and where the identities of the account holders may be masked.

The FCA advise that executing firms should be alert to the possibility of being used to facilitate insider dealing by members of OCGs and to ensure they are familiar with their obligations under SYSC 6.1.1R.

Potential triggers of suspicion that a firm might be executing trades on behalf of OCGs are set out, such as clients regularly generating Suspicious Transaction and Order Reports (STORs), or several clients trading in the same security for the first time.

What firms can do to guard against OCGs

Executing firms are advised to consider measures to guard against being used to facilitate insider dealing by OCGs, such as:

  • communicating to all clients that the firm has a zero-tolerance approach to market abuse, submits STORs to the regulator and terminates accounts based on very low thresholds of suspicion.
  • requesting all overseas broking firm clients to submit documentary evidence of adequate surveillance arrangements and a zero-tolerance approach to market abuse.
  • regarding trades placed before media reports of M&A as potentially suspicious, and submitting STORs where appropriate.

Advisory firms are expected to employ measures to guard against staff being recruited by OCGs as sources of inside information, such as:

  • advising staff who work in M&A advisory to avoid including references to having access to inside information in their social media profiles.
  • considering whether it’s appropriate to reference the names of staff engaged in M&A advisory in the firm’s own social media profiles, beyond its principal senior contacts.

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