Compliance News | October 2022

Posted by

David Mangion

on 27 Oct 2022


This month's key compliance news includes fines for Qatari fundraising, 'emotional analysis' tech, banned adverts, Interserve's cyberattack, a £900m Amazon lawsuit, and more.

Compliance News | October 2022

Our pick of key compliance stories this month

Barclays fined £50m over Qatari fundraising

The FCA has fined banking giant Barclays £50m for not disclosing particular agreements reached with Qatari entities as part of its capital raisings announced back in 2008.

The FCA claims that disclosing the payments would have been very relevant to investors and shareholders, particularly when the deal's costs were already seen as too expensive.

According to the FCA, "there was no legitimate reason or excuse for failing to disclose these matters, certainly no basis for doing so because of the financial crisis. Due transparency is always critical to financial markets, especially in times of market or financial stress."

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Lobbying watchdog calls for stricter disclosure rules

The leader of the UK's lobbying watchdog, Harry Rich, has called for stricter disclosure regulations to show which ministers have been solicited, claiming that it would "significantly assist transparency".

Rich is calling for more transparent lobbying declarations in a submission to parliament's public administration and constitutional affairs committee (Pacac) in his first public intervention on the topic since he took the job back in 2018.

In the submission, he suggests that declarations should include which minister or permanent secretary was lobbied, dates of the communications, medium of communication - whether by meeting, email, letter, phone, or text - and communication subjects. "The fact that the targets of lobbying activity are not identified on the register feels like a significant gap," it says.

Compliance Challenges 2022

Amazon is facing a £900m lawsuit

A £900m class action lawsuit is to be filed against Amazon, which accuses the firm of pushing customers towards "offers" that benefit the retailer but are not good deals for users. The complaint focuses on Amazon's "Buy Box" feature, which artificially promotes certain items above the rest in response to user searches.

Julie Hunter, a consumer advocate and the class representative, said, "Many consumers believe that Amazon offers good choice and value, but instead, it uses tricks of design to manipulate consumer choice and direct customers towards the featured offer in its Buy Box.

"Far from being a recommendation based on price or quality, the Buy Box favours products sold by Amazon itself or by retailers who pay Amazon for handling their logistics. Other sellers, however good their offers might be, are effectively shut out - relegated down-page, or hidden several clicks away in an obscure corner of Amazon's website."

The argument is that such preferential treatment results in Amazon getting higher fees while hiding cheaper offers or better delivery options from customers, which breaches the firm's competition requirements as a dominant marketplace.

Key takeaways:

  • Avoid practices that could be deemed an abuse of a dominant market position where possible
  • Ensure that your activities help to promote effective competition in the market
  • Do not intentionally limit production, distribution, or customer choices
  • Never refuse to supply a client without providing a good reason

Tips to Avoid Anti-competitive Behaviour

Warning issued against 'emotional analysis' tech

The UK's information commissioner has warned firms to avoid using 'emotional analysis' tech or face penalties due to the "pseudoscientific" nature of the field.

It's the first time the information commissioner has outright issued a blanket warning on the ineffectiveness of new technology, but the regulator claims it is justified by the damage that could be done if firms made meaningful decisions based on allegedly meaningless data.

"There's a lot of investment and engagement around biometric attempts to detect emotion, said Stephen Bonner, the deputy commissioner. Such tech attempts to infer information about mental states using data such as the shininess of a person's skin or fleeting "micro-expressions" on their faces.

"Unfortunately, these technologies don't seem to be backed by science," Bonner said. "That's quite concerning because we're aware of quite a few organisations looking into these technologies as possible ways to make pretty important decisions: to identify whether people might be fraudsters or whether job applicants are worthy of getting that role. And there doesn't seem to be any sense that these work."

6 Tips for Personal Data Compliance

Interserve fined £4.4m after cyberattack

The UK's data watchdog has fined the construction group Interserve £4.4m after a cyberattack that compromised the personal information of as many as 113,000 workers.

The attack happened at a time when Interserve was operating an outsourcing business and was a "strategic supplier to the government with clients including the Ministry of Defence". The personal data stolen included national insurance numbers, bank details, ethnic origin, sexual orientation and religion.

The ICO said Interserve Group breached data protection regulations because they failed to implement appropriate measures to prevent cyberattacks. Apart from making use of outdated software systems and protocols, the ICO found that Interserve also had a lack of adequate staff training and insufficient risk assessments.

Key takeaways:

  • Treat all unsolicited or unexpected requests with caution - challenge anything unusual or suspicious
  • Be extra vigilant - remember that having access to corporate networks and data makes you a target for cybercriminals
  • Make sure to report any breaches or concerns immediately - swift action can help limit the damage done to everyone involved

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HSBC climate ads banned by UK watchdog

The UK advertising watchdog, the Advertising Standards Authority (ASA), has banned a series of HSBC's misleading climate-related adverts and said any future campaigns must disclose the bank's role in the climate crisis.

The ruling followed several complaints over posters that appeared across the UK in the lead-up to the Cop26 climate change conference in Glasgow last year. The watchdog said the ads, which highlighted how HSBC had invested $1tn in climate-friendly initiatives, failed to acknowledge the bank's harmful contribution to global emissions.

"Despite the initiatives highlighted in the ads … HSBC continued to significantly finance investments in businesses and industries that emitted notable levels of carbon dioxide and other greenhouse gasses. We did not consider consumers would know that was the case," the ASA said. "We concluded that the ads omitted material information and were therefore misleading."

ESG Compliance Roadmap

Gatehouse Bank fined £1.5m for poor AML checks

The FCA has handed Gatehouse Bank a £1.5m fine due to the discovery of a "significant weakness" in its anti-money laundering (AML) checks. Specifically, the bank "failed to conduct sufficient checks on its customers based in countries with a higher risk of money laundering and terrorist financing" over three years.

In one instance, "Gatehouse Bank did not require the company to collect information about customers' source of funds or wealth, which was required under Gatehouse's anti-money laundering policies." As a result, "Gatehouse accepted $62m into the account without properly vetting the funds for financial crime risks."

The original penalty was supposed to be £2.2m. However, the bank agreed to settle at an "early stage of the investigation", which led to a 30% reduction.

Key takeaways:

  • Ensure your company has a robust anti-money laundering policy and that all employees and third parties comply with it
  • Always be on the lookout for unusual behaviour and transactions, and high-risk customers and jurisdictions
  • Report any concerns, knowledge or suspicions of money laundering immediately
  • Never tip off anyone suspected of money laundering that an investigation has been launched

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