The FCA's financial crime priorities

The Financial Conduct Authority ("FCA") recently published two documents which provide additional information about its current supervisory and enforcement approach and priorities in relation to financial crime issues.  These are the FCA's Anti-Money Laundering Annual Report 2012/13 ("AML Report") and the first Financial Crime Newsletter since the transition to the FCA ("Newsletter").  This e-bulletin summarises points of particular interest in these documents.

Background

The AML Report is the FCA's first annual report on financial crime issues, setting out the FCA's responsibilities, supervisory approach and current and emerging trends.  Whilst badged as relating to money laundering, it discusses financial crime risks more broadly.

The Newsletter provides an update on recent publications and enforcement actions, as well as a brief update on activity by the Financial Action Taskforce and the FCA's role in the ongoing negotiations for the Fourth EU Money Laundering Directive. 

Key points

• The AML Report sets out priority areas of financial crime risk for the FCA and examples of current trends and emerging risks – although extremely limited information is provided about practical steps that firms should take in relation to the latter.
• The FCA provides an overview description of its work on SAMLP visits, and highlights that these may involve visits to overseas branches and subsidiaries in conjunction with local supervisors.  Firms in the SAMLP will wish to be prepared for this possibility.
• The FCA is exploring the extent to which SAMLP reviews can be refined to examine a larger sample of firms and/or review firms more frequently. 
• The reports highlight concerns arising from recent thematic work, including the thematic review of financial control systems and controls in trade finance.  In the FCA's view, the root cause is "often a failure in governance… which leads… to inadequate money laundering resources and a lack of (or poor quality) assurance work across the firm.  This often focusses on whether processes have been followed rather than on the substance of whether good AML judgments are being made".
• There have been five recent enforcement actions arising from the thematic review into banks' AML controls in relation to high risk/PEP customers.  A further two AML cases are said to be in the enforcement process.  The FCA has also been utilising its early intervention powers in the AML area, and provides an example of such powers.
• The FCA's thematic review on AML and ABC controls in asset management firms is now expected later this summer.
• Thematic reviews of e-money and new payment methods are planned, together with follow up work on AML controls over high risk/PEP customers in smaller banks.
• An update is provided on recent FATF publications, and on the FCA's role in the negotiations on 4MLD.

To read our full briefing, please click here.