The FCA have issued a stark warning to the industry with its latest in a series of publications regarding money laundering control failings. On 5 March 2024, the Financial Conduct Authority (FCA) issued a letter to CEOs of ‘Annex 1’ financial institution firms, highlighting weaknesses in their financial crime reduction policies and procedures. The FCA has also instructed these otherwise unregulated firms to adopt certain standards to comply with the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (MLRs). Firms have 6 months to undertake a gap analysis of their financial crime controls, and firms have been put on notice to expect an increasingly proactive regulator in this space.
Key Takeaways
The Dear CEO letter serves as a reminder to firms of the increasing weight and focus the FCA place on financial crime prevention. The FCA will continue to strengthen their supervision and we can expect punishment for non-compliance to become more common and stringent. This should come as no surprise to the industry, given the UK’s recent Economic Crime Plan (2023 – 2026) and clear objectives to tackle money laundering. The FCA’s 2022 – 2025 Strategy follows this national imperative, stating “the importance of financial services in global economic activity” , further underlined by the FCA’s February 2024 publication with four focus areas and the FCA’s 2024/25 Business Plan Commitment 1: reducing and preventing financial crime; all of which point to greater FCA supervisory and enforcement activity in this space.
Firms should prioritise the gap analysis exercise and address any failings identified. They should ensure appropriate individuals, within senior management, complete a comprehensive, targeted analysis of anti-money laundering controls, and document evidence of actions taken to address failings and the implementation of remedial action. Ongoing horizon scanning and continuing to review further FCA publications and guidance is a must, to ensure firms are keeping track of and responding to future FCA money laundering activity, which is undoubtedly to follow throughout 2024 and beyond.
The common failings and necessary improvements steps are discussed in turn below.
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