Trends from Suspicious Transaction Reports

Posted on 31 May 2015

Trends from Suspicious Transaction Reports

Suspicious Transaction Reporting has been a consistent feature of recent FSA/FCA annual business plans. In Enforcement Watch 13, ("FOI responses: a sign of enforcement activity to come?") we reported on the sharp increases in Suspicious Transaction Reports (STRs) in 2012/2013. The upward trend continued in 2013/2014.

The FCA groups STRs into three categories. Comparing the 2013/2014 figures for each category to those for 2012/2013 shows the following:

  • Distortion/Manipulation: reports increased, by 17% (162 compared to 138).
  • False/Misleading: reports increased by 116%. (However, some caution needs to be exercised as this represented a total of 13 STRs compared to 6 the previous year.)
  • Misuse of Information: reports increased by 24% (1451 compared to 1164)

STRs are of course one of the ways in which the FCA monitors the market. We have seen enforcement action it has previously taken to try to heighten the awareness of obligations around suspicious transactions and the need to report. It is interesting to compare for example the 2014 figure of 1626 with the 2008 figure of 346. There was a fear at one stage that there would be many defensive STRs, and that this would serve a limited purpose. It is also interesting to see that the FCA reports that the submissions it receives are of a "generally high quality". We do not know of course how many of the reports above led to Enforcement action or to heightened supervision, but that would be an interesting statistic to have.

In addition, in 2014, the FCA visited 24 firms as part of its STR work and it found many firms investing heavily in their post trade market abuse surveillance. It also launched a supervisory questionnaire programme. The questionnaire programme will continue this year with 50 firms being selected to participate. The data will be used to identify which firms would most benefit from a supervisory visit. We will have to see whether enforcement action comes out of these targeted visits.

In response to repeated requests for data relating to STRs, we are also told that the FCA will now publish figures annually each February. Whilst the FCA of course hopes that there will be fewer suspicious transactions, in the current regulatory climate, we will have to see whether the trend in reporting will continue upward.

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