The UK financial regulator, the Financial Conduct Authority (FCA) has today warned a number of financial firms about common weaknesses it has identified in the firms’ financial crime controls.
The FCA said it had written to CEOs of ‘Schedule 1’ companies setting out our findings from its recent assessments of how companies comply with money laundering regulations.
Schedule 1 businesses, which include certain lenders, safekeeping providers, money brokers and leasing companies, undertake specific activities which mean they must be registered and supervised by the FCA for their compliance with Money Laundering, Terrorist Financing and the Transfer of Funds (Payer Information) Regulations 2017 (MLRs).
There are approximately 1,000 Schedule 1 registered firms, which are not authorized or subject to wider FCA regulation.
Financial crime is a priority for the regulator and initial findings from the data-based review of a sample of Annex 1 companies show that some still don’t get the basics right. The FCA identified common issues such as:
- Discrepancies between registered and actual business activities.
- Financial crime controls that had not kept pace with business growth.
- Inability to properly evaluate their own activities or the activities of their clients.
- Inadequate resources and oversight of financial crime issues and requirements.
All Schedule 1 firms will have to assess their financial crime controls against common weaknesses identified by the FCA within the next six months. Where they identify areas where they fall short of our expectations, they must act immediately to address them.
Where firms do not take appropriate action in response to the FCA’s Dear CEO letter, they may face regulatory action, including possible enforcement action.
Emad Aladhal, Director of a specialist team at the FCA dedicated to reducing and preventing financial crime and fraud said,
“Poor financial crime controls make it easier for criminals to abuse the financial system and damage the integrity of UK markets.
“We have made the fight against financial crime a priority and while we have seen progress across the board among the companies we supervise, this report highlights some key failings among Schedule 1 companies that are not subject to our full regulatory regime.
“These need to be addressed.”
The Letter from Dear FCA Chief Executive on Anti-Money Laundering can be found here (pdf).