In its thematic review published on 23 January 2025, the Financial Conduct Authority (FCA) emphasised its awareness of the pervasive threat of money laundering through markets (MLTM) and stressed the necessity for bespoke systems and controls to mitigate this risk. Since the review’s publication, the FCA has followed through, intensifying scrutiny of firms’ Business-Wide Risk Assessments (BWRAs) and training, and issuing penalties for deficiencies.
FCA Findings
With the increased FCA supervision following this thematic review, we have broken down the key takeaways that firms should carefully consider when assessing their Anti-Money Laundering (AML) framework. To further aid in understanding, we have included our own key words to summarise each FCA finding.
Business-Wide Risk Assessment (BWRA)
The FCA emphasised that a thorough understanding of financial crime risks is crucial. The existence of a BWRA document is oftentimes insufficient. Firms are falling short to tailor their risk assessments to their specific business models, leading to a lack of understanding of how they could be targeted by financial criminals. The FCA has notably identified proliferation financing as a consistently under-addressed area in BWRAs. Effective BWRAs should identify specific risks related to the business model, quantify and evaluate residual risks, and outline the steps taken to mitigate and manage these risks within the firm’s appetite.
Complyport’s key word: customised
Customer Risk Assessment (CRA)
Many firms did not adequately document their CRA methodologies. Firms should consider various risk factors, including geographical risk, and clearly document the rationale for customer risk ratings. A well-structured CRA process will serve as a valuable tool for implementing proportionate and effective financial crime processes and controls.
Complyport’s key word: proportionate
Know Your Customer (KYC) and Customer Due Diligence (CDD)
Firms are responsible for understanding their customers and completing appropriate CDD. The FCA noted that many firms were not recording their assessment of the nature and purpose of accounts and expected account activity. This lapse was limiting their ability to monitor transactions effectively. Firms should independently verify identification, adverse media, and documents received where possible, ensuring that all relevant information is collected to understand the customer’s risk profile.
Complyport’s key word: informative
Governance and Oversight
The FCA highlighted that many firms lacked formal governance processes for discussing, reviewing and approving customer onboarding. Firms should ensure that senior management is actively engaged in identifying financial crime risks and that appropriate oversight and challenge are provided for processes, controls and outcomes.
Complyport’s key word: communication
Transaction Monitoring
The FCA found that many firms faced challenges in identifying suspicious activity due to a lack of transparency and visibility of transactions. Firms should use transaction monitoring as part of an integrated process, incorporating tailored controls and alerts. Collaboration between transaction monitoring, trade surveillance, and front and middle office teams should be encouraged to identify and mitigate MLTM risk effectively.
Complyport’s key word: collaboration
Investigations and Suspicious Activity Reporting (SAR)
The quality of SARs submitted by firms requires improvement. Firms must ensure that SARs submitted to the National Crime Agency (NCA) provide a clear and specific rationale for suspicions of money laundering, include the relevant account details, and explain the context of the suspicious activity. Additionally, firms should be familiar with the MLTM SAR glossary code and use it appropriately.
The quality of SARs submitted by firms requires improvement. Firms must ensure that SARs submitted to the National Crime Agency (NCA) provide a clear and specific rationale for suspicions of money laundering, include relevant account details and explain the context of the suspicious activity. Additionally, firms should be familiar with the UK Financial Intelligence Unit (UKFIU) and the NCA SARs glossary code and use it appropriately.
Complyport’s key word: evidence
AML Training
The FCA pushed training as a vital tool for firms to raise awareness of financial crime risk and support systems and controls. More than that, the FCA made a call for bespoke training. Though most firms were conducting annual AML training, they found that much of the content was not relevant to the specific business products, services and financial crime risks of the firms. The FCA notes that many firms do not tailor their training content to their business model, related risks, and common red flags. The expectation is clear: AML training must be bespoke, not off-the-shelf.
Complyport’s key word: bespoke
FCA’s Key Takeaway for Firms
FCA has placed an emphasis on bespoke AML training, which can integrate all the aforementioned findings.
For instance, adopting the perspective of a money launderer attempting to exploit your business. This type of AML training exercise can be applied to the BWRA, which requires firms to pinpoint their specific financial crime risks.
The CRA necessitates a proportionate approach. Utilise case studies to incorporate real-life typologies of financial criminals laundering money through markets during training sessions. This helps staff understand the practical implications of a strong CRA and KYC system, as well as recognise suspicious patterns and behaviours.
Bespoke training can also be cross-functional. Effective transaction monitoring, governance, and AML leadership within a firm require collaboration and communication. Joint training sessions can provide a holistic understanding of financial crime risks and promote a coordinated approach across your firm’s teams and business lines.
How Complyport Can Help
Complyport offers comprehensive, bespoke AML training programmes, delivered online or face-to-face, to meet your organisation’s specific needs.
Our team of experts can develop customised training modules tailored to your requirements, with engaging and interactive training sessions and continuous support and access to updated training materials.
Book a Meeting with a Complyport SME
To understand how FCA expectations on money laundering through markets, proliferation financing and tailored AML training apply to your firm, and to receive expert guidance on enhancing your regulatory controls, schedule a consultation with a Complyport Subject Matter Expert today.
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