The FCA has released its third annual anti-money laundering (AML) report 2015-2016 emphasizing financial crime as one of the regulator’s top seven priorities for 2016/2017.
AML supervision strategy
The quality of firms’ AML systems and controls remains high on the FCA’s agenda as is the implementation of its AML supervision strategy. The FCA’s AML supervision strategy includes the following two AML supervisory programmes:
- Systematic Anti-Money Laundering Programme (SAMLP) which covers 14 major retail and investment banks operating in the UK including their overseas operations with higher risk business models/strategic importance. 11 SAMLP assessments have been completed to date.
- Regular AML inspections programme for a group of other firms (mostly smaller banks) presenting higher financial crime risk. The firms inspected vary depending on risk.
In late 2014/early 2015, the FCA visited a number of consumer credit firms to assess their financial crime systems and controls as part of its thematic review. The FCA found that these firms needed to enhance their understanding of financial crime issues in some areas. A webcast setting out the FCA’s expectations of consumer credit firms on financial crime is due to be released shortly.
The regulator proposes to introduce a financial crime data return covering a significant proportion of the firms it regulates which is to be partially published in aggregate form. In this regard, the FCA expects to issue a Policy Statement later this month and to receive its first run of data in early 2017.
Recent work findings and outcomes
There have been some positive findings from the latest SAMLP reviews with major banks recognising AML as an issue requiring attention from top management. However, there are challenges in ensuring that these good intentions are translated into a strong AML culture throughout the bank. Several other major banks have been required to undertake major remediation programmes where serious weaknesses in key AML controls have been found.
Smaller high-risk firms are showing signs of much better engagement by senior management and resulting improvements in their AML controls.
Looking back, the FCA continued with its use of regulatory tools as follows:
- in 2015/2016, the FCA made two interventions, restricting high-risk business in firms with inadequate controls;
- since 2014/2015, 11 reports from Skilled Persons under section 166 of FSMA have been commissioned;
- since June 2013, there have been 15 cases where the FCA has asked senior management for formal attestation in relation to the remedial work; and
- there are currently several enforcement investigations under way, most of which relate to AML weaknesses.
The FCA has confirmed that it will carry out further financial crime work in the following areas:
- improving the way in which firms identify money laundering risks – for banks to focus on the highest risk customers;
- fostering innovation and reducing cost in AML compliance – ensuring transposition of the Fourth EU Money Laundering Directive in a way that allows the use of digital identification;
- a global response to de-risking – working with international bodies to ensure more consistent AML expectations;
- how banks communicate with their customers – hosting roundtable discussions with banks to encourage better client communication; and
- improving effectiveness of AML supervision – working with the Government and other AML supervisors in the UK to make the AML supervision more consistent and effective across all sectors.
Cooperation at home and abroad
Since April 2014, the FCA has played a key role in establishing a mechanism for improved information-sharing between financial institutions and law enforcement by developing the Joint Money Laundering Intelligence Taskforce (JMLIT). Originally a pilot project, it has now become a permanent taskforce with an aim of improving intelligence-sharing arrangements to help fight money laundering, terrorist financing and financial crime. JMLIT welcomes and encourages participation from small banks, building societies and other institutions in the regulated sector.
The FCA is now working with the HM Treasury and other partners to prepare for the next Financial Action Task Force evaluation of UK AML supervision which is due to take place in late 2017 and early 2018, in which it plays a major part.
View FCA Anti-money laundering annual report 2015/16, 14 July 2016.