Syed Rahman outlines the problems highlighted by the Financial Crime Authority.
Financial crime risks are being ignored by a wide range of companies, according to a stark warning from the Financial Conduct Authority (FCA).
The UK’s financial services regulator has said that some companies are not paying adequate attention to the dangers of financial crime, such as money laundering and bribery.
Its 2025 review of business practices examined building societies, financial platforms, custody services, electronic-money companies and wealth managers. The review found that most firms involved did have risk assessments in place. But only a small number were identifying the risks they faced or tailoring their risk assessments to their specific situations. Some of the issues involved firms aggregating risks to the entire business where it might not be appropriate to do so.
In the statement, the FCA said: "We are concerned that some firms could not explain sufficiently how they are managing and mitigating identified risks.’’
According to the FCA, some business-wide risk assessments that were being carried out by companies were focusing mainly on fraud or general risks, while paying no attention to the specific money laundering risks they faced.
Knowledge
The regulator added that the senior management teams at many companies appeared to have an understanding and awareness of fraud but lacked knowledge of other financial crime risks, such as sanctions, bribery and corruption, and terrorist financing. It accused companies of oversimplifying the risks they faced and of being unable to explain how those risks could affect them.
The FCA said there was little evidence of how risk assessments, decision-making and monitoring activities in many companies formed part of a joined-up approach to financial crime. Many companies had not developed customer risk assessments to ensure they were accurate, consistent and reflected business growth. There was also, in some companies, a lack of documenting of senior management discussion and approval of business-wide risk assessments.
The FCA has said it will work with the companies where shortcomings were identified to ensure improvements are made. It will continue to monitor them.
The FCA’s warning has highlighted the fact that good practice often involves going beyond the minimum regarding the regulatory framework. It can require adapting to the business sector as well as the precise situations and transactions a company has involvement in. Whilst the FCA does not state that any of these firms are in breach of regulation, it does encourage them to reflect on the findings in the context of their firm to ensure that they comply with best practice.
