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Rapid Response Team: 0800 559 3500
Switchboard: +44 (0)203 947 1539
Rapid Response Team: 0800 559 3500
Switchboard: +44 (0)203 947 1539

The FCA and Anti-Money Laundering Oversight

Author: Syedur Rahman  23 September 2020

Syed Rahman of Rahman Ravelli assesses the Financial Conduct Authority’s proposed changes to anti-money laundering oversight.

Proposals drawn up by the Financial Conduct Authority (FCA) may lead to some wealth managers and advisers being removed from a level of anti-money laundering oversight.

An obligation to report risk factors under the FCA’s 2016 “Financial Crime Reporting: feedback on Chapter 6 of CP15/42 and final rules’’ is applied at present as an extra enforcement layer to nearly one in 10 firms regulated under broader anti-money laundering rules.

When this obligation was introduced, the FCA said it would monitor the effectiveness of this approach. Now, the FCA has said it proposes to remove that obligation from firms that make arrangements for investments to be carried out by a third party, while the rules will continue to be applied to those who influence client assets directly. The changes will also see firms trading in crypto assets placed under the obligations for the first time, along with an increased number of firms regulated under trading and money transfer rules.

The FCA believes the changes will lead to a more data-led supervisory approach that will broaden its understanding of firms that may face money laundering risks due to their activities.

In theory, this approach will improve AML controls. It will provide the FCA with data that enables it to assess money laundering risks in sectors where financial crime is common. It is notable that new categories now coming under the scope of this include e-custodian wallet providers and crypto asset exchanges. Custodians provide services to safeguard, hold, store and transfer private cryptographic keys on behalf of customers while cryptoasset exchanges retain a significant amount of information about their users. It is likely that data obtained from such firms will change how the cryptoasset sector operates.

While this move by the FCA should enhance regulation in regards to AML, the UK has some way to go when compared to other high-risk countries. As far as companies are concerned, compliance is key. Firms - particularly their compliance officers - need to be reviewing matters regularly and fostering a culture of risk awareness.

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Syedur Rahman is known for his in-depth experience of serious fraud, white-collar crime and serious crime cases, as well as his expertise in worldwide asset tracing and recovery, international arbitration, civil recovery, cryptocurrency and high-stakes commercial disputes.

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