The Financial Conduct Authority (FCA) has urged firms to better protect themselves against money laundering after its review found gaps remain in defences.
The regulator said it has identified areas where financial services firms needed to improve.
The FCA has observed:
• An underestimation of the risks of money laundering firms are exposed to.
• Over-reliance on others in the transaction chain completing appropriate due-diligence checks on customers.
• Limited information sharing between firms.
• Insufficient awareness of the money laundering through the markets suspicious activity reports glossary code.
The review is part of the FCA’s attempt to tackle the risk of money laundering in the financial-services industry.
It was first published in 2019 after the regulator undertook a study.
It said progress has been made since, including improvements to customer risk assessments, onboarding processes, governance and oversight, and collaboration between trade surveillance and transaction monitoring teams.
However, in a review update published today (23 January), the FCA said the threat of money laundering through the market is “continually evolving” and it wants to help firms better understand and mitigate the risk.
The update covers examples of good and poor practice on enhancing systems, controls and training, practical case studies and detailed areas of focus for firms.
The FCA’s joint executive director of enforcement and market oversight, Steve Smart, said: “The flow of capital is an essential part of a thriving and competitive market, but tainted cash must not be allowed to pollute the rest.
“For the UK financial services industry to grow, investors and institutions need to have trust in it. Integrity is vital for that, and firms play a key role in helping to detect criminal activity.
“Firms need to keep their controls under review and ensure they are effective against financial crime. This report will help them do that.”
Imogen Makin, counsel at WilmerHale, added: “Firms should take the time now to consider their systems and controls in light of the FCA’s examples of good and poor practice.
“If firms fail to heed the FCA’s advice and reassess their systems and controls on a regular basis, making enhancements accordingly, there is a very real risk of either supervisory or enforcement action.”
What risk of either supervisory or enforcement action? The FCA routinely fails to act on whistle blows (despite lying regularly about being keen to encourage them), reports in the media and even emails direct to the desk its CEO (e.g. Tony Hetherington to Bailey re: Woodford). It’s just the usual sabre-rattling codswallop. Much more fun (for them) to dream up yet more regulations. Existing ones are yesterday’s news and rarely revisited.