FCA Takes Action Against Six Firms on Potential Money Laundering

The latest update from the FCA;

Restrictions have been placed on 6 unregulated lenders, known as Annex 1 firms, after the Financial Conduct Authority (FCA) raised concerns about their anti-money laundering policies, controls and procedures while assessing their applications.

The restrictions were imposed by the FCA on each firm’s request and limit their ability to take on new customers or do new business with existing customers, including extending existing credit.

This action forms part of the FCA’s enhanced oversight of Annex 1 firms. These firms operate in sectors that can present a heightened risk of money laundering and other financial crime and are required to register with the FCA for supervision under the Money Laundering Regulations. They are not authorised or subject to wider FCA regulation.

The FCA has previously warned Annex 1 firms that they will be subject to increased scrutiny. They must be able to demonstrate they understand the financial crime risks they face and have effective systems and controls in place to manage those risks, or face action.

More widely, the FCA is assessing responses to an information request sent to around 900 registered Annex 1 firms to identify and disrupt financial crime risks and determine where further action is needed.

The FCA has also reminded regulated firms that, when dealing with Annex 1 firms, they must carry out due diligence to understand the firm’s business, in accordance with legislative requirements. This includes seeking direct confirmation from the firm of its registration status, conducting independent checks of the information it provides, and understanding and managing any risks.

Registration under the Money Laundering Regulations is not a substitute for regulated firms carrying out their own appropriate due diligence.

Steve Smart, executive director lead for fighting financial crime at the FCA, said:

“We have warned Annex 1 firms that they face increased scrutiny. They must demonstrate they can manage the money laundering risks they face. Where they cannot satisfy us, we will intervene.”