The FCA has published a speech given by Rob Gruppetta, Head of the FCA’s Financial Crime Department. The speech is entitled Examining the future of anti-money laundering regulations.

In his speech Mr Gruppetta covers:

• the Fourth Anti-Money Laundering Directive (4MLD). Mr Gruppetta mentions that the 4MLD raises some potentially controversial questions. For example, it expects financial services firms to “screen employees” and apply checks to British public officials for the first time. Mr Gruppetta states that the Government will soon publish a consultation paper looking at how the UK will implement the 4MLD and encourages engagement with this consultation;
• the Financial Crime Return. Another consultation that Mr Gruppetta encourages participation in concerns the FCA’s proposed new data return. The FCA has just published a consultation paper proposing that, for the first time, it will systemically gather statistics from firms about their financial crime risks. This new data return stems from a cross-FCA review of how it gathers information from firms;
• the Senior Managers’ Regime. Mr Gruppetta explains that the FCA’s purpose in designating the Money Laundering Reporting Officer (MLRO) as a senior management function was to recognise the importance of an approved individual being accountable for ensuring that anti-money laundering controls are properly designed and implemented. In effect, the role is the same as the MLRO under the existing approved persons’ regime. Mr Gruppetta adds that the FCA is keen to ensure that overall responsibility for the firm’s policies and procedures – the systems and controls for countering the risk that the firm might be used to further financial crime – should be discharged at the right level in firms. The FCA expects firms to allocate the prescribed responsibility to the most senior individual responsible for reporting to the firm’s governing body on financial crime matters. This may or may not be the MLRO. Where it is not the MLRO, the prescribed responsibility includes the supervision of the MLRO. This is because it recognises that the MLRO may not always be at a senior executive level. Mr Gruppetta also clarifies that while the person assigned the prescribed responsibility is responsible for the firm’s financial crime policies and procedures, all senior managers of operational units in a firm should be taking reasonable steps to mitigate financial crime risk;
• de-risking. Mr Grupetta states that effective money-laundering risk management need not result in wholesale de-risking and that taking a risk-based approach does not require banks to deal generically with whole categories of customers or potential customers. Instead, the FCA expects banks to recognise that the risk associated with different individual business relationships within a single broad category varies, and to manage that risk appropriately. Whilst the FCA accepts that the decision to accept or maintain a business relationship is ultimately a commercial one for the bank, it does feel that there should be relatively few cases where it is necessary to decline business relationships solely because of anti-money laundering requirements. Mr Gruppetta adds that there is a lot of “noise” around de-risking but much of what is heard is anecdotal or an isolated case study with little good quality data. Therefore the FCA has commissioned research to try to shed some light on the de-risking phenomenon;
• innovation and new technology. Mr Grupetta explains that as a regulator the FCA is technology neutral and that the same can be said of the Money Laundering Regulations. The FCA is more than happy to see innovative methods being deployed by financial services firms and that if it is doing anything that creates barriers to this, it wants to know so that it can stop. Last month the FCA launched a call for evidence about “reg-tech” asking views on the role it should play in fostering new technologies, including technologies that would aid detection and prevention of money laundering, including by removing any regulatory barriers that exist; and
• Mr Gruppetta states that no firm is referred to enforcement lightly. Enforcement proceedings on financial crime issues are based on material failings in high risk areas. However, he adds that enforcement work is not the whole solution and that it complements the FCA’s role in spreading and promoting good practice in a constructive manner, something that the FCA tries to do through its thematic reviews and the non-binding guidance in the publication Financial crime: a guide for firms.

View Examining the future of anti-money laundering regulations, 8 December 2015