The Financial Conduct Authority (FCA) has significantly reduced the number of undercover investigations into financial firms, even as it holds expanded powers designed to protect consumers and prevent misconduct. According to the regulator’s most recent data, the number of deep-dive probes, known as “skilled persons reports,” fell to 31 in the year ending March 2026, marking the lowest total in eight years. This compares with 83 such assessments undertaken two years earlier, shortly after the introduction of new consumer duty rules.

These skilled persons reports, typically conducted by external experts, are intended to identify weaknesses in firms’ systems for detecting and preventing financial crimes such as fraud and money laundering. The FCA has emphasized that the investigations address a variety of risks, with financial crime accounting for over 40 percent of cases, underscoring its status as a regulatory priority.

The decline in these covert assessments comes amid growing pressure from government ministers advocating a lighter regulatory touch to stimulate weak economic growth. Chancellor Jeremy Hunt has criticized current rules as overly burdensome, warning they may stifle innovation unless substantial reforms are undertaken. Meanwhile, Bank of England Governor Andrew Bailey has cautioned against excessive deregulation, highlighting the potential risks to market stability.

Industry observers and consumer advocates have expressed concern that the reduction in detailed regulatory scrutiny risks undermining consumer protection and market trust. Andy Agathangelou, founder of the Transparency Task Force campaign group, criticized the trend, arguing that voluntary compliance and self-reporting are insufficient without rigorous independent verification. He contended that regulatory inquiry is essential for maintaining confidence and supporting a sustainable financial sector.

The issue gained renewed attention following a skilled persons review of wealth manager Rathbones, which revealed significant shortcomings in the firm’s due diligence processes for onboarding new clients. In response, Rathbones halted accepting certain high-risk clients and decided to cease charging fees on cash held in client portfolios, moves that could cost the firm up to £1 billion. The review also identified gaps in Rathbones’ implementation of the consumer duty framework.

Some critics have suggested that the FCA, which operates with an annual budget approaching £800 million, has the resources to conduct more such investigations but is opting not to do so. The decline in covert probes occurs against a backdrop of parliamentary calls for a public inquiry into financial conduct regulation. Lawmakers have highlighted a persistent pattern of scandals marked by delayed interventions, marginalization of whistleblowers, and significant consumer harm.

The FCA, led by Chief Executive Nikhil Rathi, defended its approach by noting that the volume of reviews fluctuates according to where the greatest risks to consumers and markets are identified. Rathi has indicated a strategic shift towards relying more heavily on the consumer duty framework to achieve regulatory objectives, suggesting that the need for extensive rule-making—and by extension, some forms of detailed investigations—may decrease over time.