4 June 2024
Share Print

Financial Regulation - In the know: Financial Crime

To The Point
(8 min read)

In this edition we discuss the Financial Conduct Authority's (FCA) consultation paper on proposed changes to its Financial Crime Guide, its 'Dear CEO' letter on common AML failings in Annex I financial institutions, HMT's ongoing consultation on proposed changes to the Money Laundering Regulations (MLRs); and a second economic crime manifesto that has been published jointly by two All-Party Parliamentary Groups.

The FCA is consulting on changes to its Financial Crime Guide

On 25 April 2024, the FCA published consultation paper CP24/9 on proposed changes to its Financial Crime Guide (FCG). Whilst the FCG contains non-Handbook guidance, rather than rules, experience strongly suggests the FCA will expect regulated firms to have taken it into account when designing and maintaining their financial crime control environment. Key changes that the FCA is proposing include new guidance on conduct risk assessments, counter-proliferation financing, sanctions circumvention and data security measures. It would be prudent for regulated firms to review the proposed changes and consider their potential impact now, ahead of the new version of FCG being implemented by way of an FCA policy statement later this year. Comments and feedback must be submitted to the FCA by 27 June 2024 using the online form or by post. This is therefore also an opportunity to shape the FCA's guidance for the future. 

Read more about the changes the FCA is proposing

FCA 'Dear CEO' letter to Annex 1 institutions on common control failings identified in anti-money laundering frameworks 

The FCA issued a ‘Dear CEO’ letter to Annex 1 institutions on 5 March 2024. The letter summarised the FCA's findings that some such firms (which are not authorised under FSMA 2000 but are still within scope of the MLRs because of some of their activities) are not complying with anti-money laundering (AML) requirements. The FCA identified several common failings in their AML frameworks, including in relation to due diligence, ongoing monitoring, policies and procedures, governance, management information and training. The letter sets out the FCA's expectation that firms will perform a gap analysis against certain key themes within the letter within six months of receiving it, and will be prepared to discuss the outcome of that in future engagement with the regulator. It also makes clear that the FCA will expect firms to demonstrate what actions they have taken to mitigate gaps. 

Read more about the common weaknesses FCA found

HMT consultation on improving the effectiveness of Money Laundering Regulations

On 11 March 2024, HM Treasury published a consultation on improving the effectiveness of the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (the ‘MLRs’). The consultation is aimed at updating the MLRs and making changes to increase their effectiveness and ensure proportionality for both regulated firms and customers. The consultation anticipates changes to the MLRs around Customer Due Diligence (CDD), strengthening system coordination, clarity on scope, and the Trust Registration Service registration requirements. While on a first review, many of the changes and issues raised in the consultation may appear technical, we suggest this is an important opportunity to seek to address some key practical issues, particularly a lack of clarity in some areas of the MLRs about what they require of firms. The consultation closes on 9 June 2024 and there are a number of ways for interested persons to respond. 

Find out more about these proposals

Two All-Party Parliamentary Groups (APPGs) present their second economic crime manifesto

The APPGs on Anti-Corruption & Responsible Tax and Fair Business Banking, which aim to combat economic crime, corruption, and illicit financial activities both within the UK and internationally, have jointly presented a second manifesto. The document contains a series of policy recommendations around transparency (of trusts, corporates, and property ownership), regulation, enforcement, and accountability to tackle economic crime. Although the calling of a UK general election in July 2024 is likely to bring about change to the make-up of Parliament, and will determine the extent to which the reforms proposed find their way into future legislative action, the second manifesto contains interesting policy ideas that could help shape the way economic crime legal and regulatory norms develop in the future.  It is in our view useful reading, particularly for those involved in legal horizon scanning. 

For further information, see here

Next steps

If you want to find out what these updates mean for your business, or discuss training opportunities or systems and controls changes, please feel free to get in touch with our Global Investigations team.

Don't miss out

Join our mailing list and receive the Top 3-5 financial crime updates you need to know about