On 24 August 2020, the Financial Conduct Authority (FCA) published a consultation paper (CP20/17) focused on extending its annual financial crime reporting obligation to include firms that carry on regulated activities that potentially pose a higher money laundering risk. This follows its 2019/20 Business Plan commitment to consider extending the reporting obligation to more firms.
The FCA’s annual financial crime reporting obligation is set out in its Handbook SUP 16.23 “Annual Financial Crime Report” (REP-CRIM). It shows the FCA the potential money laundering risk faced by a firm based on its regulated activities and the nature of its customers.
Approximately 2,500 of the 23,000 firms the FCA supervises under The Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (MLRs) submit annual REP-CRIM information. The FCA is proposing to extended its requirements to include firms that carry on regulated activities that it considers potentially pose a higher money laundering risk. This extension will be irrespective of a firm’s revenue threshold.
Under the proposal, the following additional firms would need to provide the FCA with REP-CRIM information irrespective of their total revenue:
- All FSMA authorised firms within the scope of the MLRs and:
- That hold client money or assets (i.e. subject to FCA Handbook CASS 5, 6 or 7); or
- That carry on an activity that the FCA considers poses higher money laundering risk.
- All payment institutions except for payment institutions that only carry out at least one of the following payment services:
- Money remittance only – that are supervised by Her Majesty’s Revenue and Customs (HMRC) for anti-money laundering purposes.
- Account information services and/or payment initiation services (i.e. firms that do not receive or hold clients’ money or carry out payment transactions).
- EEA-authorised payment institutions which are permitted to provide a payment service in the UK only under the freedom to provide services.
- All electronic money institutions.
- All Multilateral Trading Facilities (MTFs).
- All Organised Trading Facilities (OTFs).
- All cryptoasset exchange providers and custodian wallet providers.
The FCA is also consulting on removing two activities from the REP-CRIM reporting obligation, which it considers are outside of the scope of the MLRs. These activities are “home finance mediation” and “making arrangements with a view to transactions in investments”.
The consultation period closes on 23 November 2020 and, subject to the feedback received, the FCA aims to issue its Policy Statement in Q1 2021.