On 5 March 2024, the Financial Conduct Authority (FCA) issued a warning to firms about common failings it has identified in firms’ financial crime controls. It wrote to CEOs of Annex 1 firms, setting out the findings from its recent assessments of how firms are complying with anti-money laundering (AML) regulations.

The letter warns that initial findings from the FCA’s data-led review of a sample of Annex 1 firms indicates that some are still not getting the basics right, in terms of tackling financial crime. Common issues identified included:

  • Discrepancies between firms’ registered and actual activities.
  • Financial crime controls which had not kept pace with business growth.
  • A failure to risk assess their own or their customers’ activities properly.
  • Inadequate resourcing and oversight of financial crime issues and requirements. 

The FCA flags that all Annex 1 firms should assess their financial crime controls against the common weaknesses found within the next 6 months. Where firms identify areas where they are falling short of the FCA’s expectations, they should act promptly to resolve them, and the FCA warns that firms that do not take suitable steps in response to its letter could face regulatory action, including possible enforcement action. One recent illustration of this approach can be found in the Nvayo Upper Tribunal (UT) decision which dealt with restrictions imposed on a firm arising from, amongst other things, the FCA’s concerns about the firm’s AML regulatory compliance following an AML review. The UT refused to suspend the restrictions pending the outcome of the firm’s challenge regarding the imposition of the restrictions, despite Nvayo explaining the detrimental impact the restrictions had on its customers.

Emad Aladhal, Director of a team of specialists at the FCA dedicated to reducing and preventing financial crime and fraud, said that the report “highlights some basic failures amongst Annex 1 firms which are not subject to our full regulatory regime. These must be addressed.”

The letter follows the FCA’s recent fighting financial crime update at the half-way point in its 3-year strategy.

The Nvayo judgment can be found here.