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Financial crime replaces house prices on UK regulator watch list

[LONDON] Financial crime has replaced rapid house price growth on the watch list of Britain's markets regulator after a series of scandals that have shaken public faith in the finance industry.

The Financial Conduct Authority (FCA) announced on Tuesday seven key risk areas as part of its 2015-16 business plan, with financial crime added to the list and house price growth - which has cooled in recent months - dropped since last year.

The regulator said it would focus on company controls to prevent money laundering, including terrorist financing and sanctions, bribery and corruption, and consumer fraud.

"Firms that fail to place adequate emphasis on implementing necessary systems and controls are more vulnerable to being used to further financial crime," it said.

Other areas of focus include encouraging a corporate culture that puts customers and fairness above profit, monitoring a newly liberalised pensions market, ensuring technology does not favour any one party and that contract terms are fair.

Corporate culture has long been a key theme for the FCA, a two-year-old organisation whose regulatory predecessor was blamed for failing to spot and halt reckless market practices that helped to spark the 2007-08 financial crisis.

Since its birth the FCA - with US and European peers - has attempted to restore a sense of ethics to markets while investigating allegations of rigging in markets such as foreign exchange and benchmark interest rates and ensuring consumers are compensated after scandals such as a loan insurance mis-selling scam that has cost banks 16 billion pounds (S$32.94 billion).

Its workload for next year will include an inquiry into any conflicts of interest in "dark pools", private share-trading venues set up by banks for large customers that have come under scrutiny amid concerns they are too opaque, and a study on the asset management industry to examine charges paid by investors.

Other areas of focus include examining whether pension firms are helping consumers to make appropriate choices after an overhaul that eases a requirement for people to buy annuities as part of their pension - but which could trigger scams that prey on vulnerable, cash-rich pensioners.

The regulator will also examine how much flexibility there is for consumers in the mortgage market after new affordability rules were introduced, eyeing barriers to competition and consumers' ability to switch provider or access credit.

Despite removing house prices from its watch list, the FCA said it would continue to monitor them as well as consumers'ability to cope with a potential rise in interest rates.

REUTERS