The U.K. Financial Conduct Authority (FCA) warned the chief executive officers of approximately 1,000 financial institutions it supervises regarding common failures in anti-money laundering (AML) procedures it observed during recent assessments.
The agency’s “Dear CEO letter,” published Tuesday, is addressed to the leaders of Annex 1 businesses, which include certain lenders, safe custody providers, money brokers, and financial leasing companies. These firms are not subject to wide FCA regulation but must register regarding compliance with the Money Laundering, Terrorist Financing, and Transfer of Funds Regulations 2017 (MLRs).
In the letter, the FCA noted frequently observed deficiencies including:
- Discrepancies between firms’ registered and actual activities and lack of financial crime controls to keep pace;
- Weaknesses in business-wide risk assessments and customer risk assessments;
- Lack of detail in policies; and
- Lack of resources for financial crime, inadequate training, and the absence of clear audit trails for decision-making.
The agency advised the firm leaders to “take the necessary steps to gain assurance that your firm’s financial crime policies, controls, and procedures are commensurate with the risk profile of your firm and meet the requirement of the MLRs.”
It suggested the businesses undertake a gap analysis against the weaknesses observed and said it would seek evidence of actions taken to address any gaps identified during future assessments. Continued failures could result in enforcement, it said.
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