19 October 2023
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FCA demonstrates commitment to enforcement of AML systems and controls requirements in latest fine against brokerage firm

To The Point
(5 min read)

The FCA continues to focus its enforcement activity on firms' anti-money laundering ("AML") systems and controls.  Its latest final notice against an investment brokerage (ADM Investor Services International, the "Firm") demonstrates its continuing use of Principle 3 to hold firms accountable for AML systems and controls issues.  The case involved breaches which the FCA found to be serious, and is a good example of the FCA analysing the effectiveness and robustness of a firm's AML policies, controls and procedures in granular detail, through the lifecycle of a customer relationship.  Among other matters, it contains some useful observations on the effectiveness of internal audit, and the contents of MLRO reports.  Global Investigations partner, David Pygott, senior knowledge lawyer, Gilly Bradbury, and associate, Minos Lau, discuss the FCA's enforcement action and some key learnings. 

The final notice against the Firm 

On 29 September 2023, the FCA published its final notice, imposing a financial penalty of £6,470,600 in respect of breaches of Principle 3 between September 2014 and October 2016.  The penalty took into account a 30% settlement discount.

The FCA identified issues with the Firm's systems and controls across all lines of defence, finding that it breached Principle 3 because of: 

  • inadequate procedures, including an inadequate AML risk assessment, no procedures in place to conduct enhanced due diligence (EDD) on politically exposed persons (PEPs), failures to conduct EDD and other record keeping failures, as well as failing to conduct on-going monitoring of CDD information on high-risk clients; and
  • governance and oversight failures. In particular, the FCA found that the Firm's internal audit function did not identify relevant AML and financial crime failings and/or communicate these effectively to senior management, and the FCA found weaknesses in the Firm's approach to MLRO reports. 

The FCA's findings are considered in more detail below. 

Lessons learned
Firms need to effectively address concerns that the FCA highlights to them
AML policies and associated procedures need to be revised and kept up to date
Unacceptable weaknesses in customer due diligence (CDD) and ongoing monitoring
Issues with internal audit
Some useful commentary about the contents of an MLRO report

Next steps

If you would like to discuss best practices in terms of AML systems and processes or any of the issues raised in this article, please reach out to any of the contacts below.

David Pygott >
Minos Lau >

To the Point 

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