FCA Updates on Guidance Regarding Financial Crime

Pictured: Nikhil Rathi, Chief Executive at the FCA

Context

Financial crime is a key priority in the FCA’s 2022-2025 Strategy. In CP24/9: Financial Crime Guide updates conducted on 25 April 2024 the FCA opened a consultation which proposed changes to the Guide relating to:

• sanctions

• proliferation financing

• transaction monitoring

• adding references to cryptoassets and the Consumer Duty, along with consequential changes such as data security and updating case studies.

The changes focused on areas where firms wanted additional guidance to clarify our expectations and aim to help firms:

• understand what we expect

• assess the adequacy of their financial crime systems and controls

• remedy deficiencies

Content

Financial Crime Guide provides practical help, information and examples of good practice that firms can adopt to reduce the risks of being used to further financial crime:

• 2.9 Sanctions: Following Russia’s illegal invasion of Ukraine in 2022, we conducted extensive assessments of firms’ sanctions’ systems and controls. We are updating the sanctions chapter to reflect what we and firms have learned.

• 2.10 Proliferation Financing (PF): We are updating the guidance to ensure PF is explicitly referenced throughout the Guide where appropriate. This includes highlighting a 2022 change to the MLRs, which requires firms to conduct PF Risk Assessments.

• 2.11 Transaction Monitoring (TM): We are setting key guidance for firms on how to implement and monitor transaction monitoring systems. This includes supporting responsible innovation and new technological approaches.

• 2.12 Cryptoasset Businesses: Cryptoasset businesses registered under the Money Laundering Regulations (MLRs) have been subject to FCA supervision for AML/CTF/PF purposes since January 2020. We are making it clear that cryptoasset businesses should refer to the Guide.

• 2.13 Consumer Duty: The Guide clearly states that firms should consider whether their systems and controls are consistent with their obligations under the Duty.

• 7 2.14 Consequential Changes: We are making consequential changes to the Guide, including replacing expired links, updating outdated references to European Union rules and refreshing case studies based on more recent FCA enforcement notices.

Businesses Affected

• all FCA financial crime supervised firms

• firms that we supervise under the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (MLRs), including cryptoasset businesses

• individuals and organisations working with firms subject to FCA financial crime and MLRs supervision

• financial services sector trade associations

• any other parties interested in FCA financial crime supervision; this could include non-governmental organisations working on financial crime prevention or academics

Next Steps for Businesses

• Firms should read and understand the changes.

• Firms need to consider what adjustments may be needed to their financial crime systems and controls. This could include changes to internal policies, monitoring systems, training, governance or other elements of systems and controls.

• Firms to review their systems and controls in light of the changes, where applicable.

• Firms to evaluate whether their systems and controls are adequate and proportionate, considering the revised guidance.

• Firms are to have a heightened awareness of what constitutes good and poor practice.