The Financial Conduct Authority has written to more than 250 asset managers as part of its work to stamp out money laundering. It was reported that the watchdog, based in the financial district in London, had written to fund houses and alternatives firms requesting a raft of information on how they were keeping a check on dirty money.
Firms had been given until December 29 to respond to questions including on their systems and controls for high-risk clients and jurisdictions; and how they monitored crypto transactions, screened for sanctions and dealt with complex structures such as private markets.
As of January 28, 212 firms out of the 278 that had been approached had responded, according to data provided under the Freedom of Information Act. The FCA provided an extension to some firms and continues to follow up with relevant firms as part of a multi-phased project, a person close to the regulator confirmed.
Stamping out the financial district’s (known as the ‘City’) ‘Londongrad’ reputation has been moving up the agenda at the FCA. In December, it fined Nationwide £44 million over its financial crime controls. Barclays was hit for a similar amount last July, while digital bank Starling was asked to pay £29 million and Metro Bank £16 million in 2024.
Crypto exchanges such as Coinbase have also faced regulatory sanction for not doing enough to monitor the flow of illicit finance through their platforms.
“The FCA has been clear through its recent publications that financial crime compliance is a core strategic priority and compliance is central to how firms are supervised”, said Nicky Green, advisory director at compliance consultancy Square 4 Partners.
“Its latest feedback on enterprise-wide risk assessments and the recent fine for Nationwide reinforces this message. Regulators are raising the bar on governance, controls and accountability and firms that fail to respond risk not only regulatory action, but serious reputational damage”.
There could be a host of reasons firms did not respond by the deadline, according to compliance consultants Ocorian, who worked with a number of firms on the request.
Some may not have felt the questions were applicable to their business, considering themselves advisors rather than fund managers. Others may not have updated their contact details. Some firms found the survey in their spam folders, the consultancy said.
Meanwhile, the December 29 deadline given for the survey, which was sent on November 10, combined with the weight of information requested may have caught some firms out, particularly smaller ones that were short-staffed at Christmas time.
Original communications sent to firms showed the FCA planned to interview firms’ money-laundering reporting officers as part of a more extensive second phase of its work. It will be again reviewing how money laundering staff are trained and their level of experience after zoning in on the issue in 2022.
The FCA will also look closer at professional services firms as it takes on new responsibilities for anti-money-laundering checks at law firms and accountancies.
On an entirely separate issue, the FCA has also said it will avoid introducing fresh rules as its stock response to new forms of market failure, as the regulator looks to avoid time consuming consultation processes and speed up its action.
CEO Nikhil Rathi, told the Fairer Finance podcast that “not every problem can be solved quickly” by the watchdog pushing through fresh rounds of red tape and instead FCA officials will rely on its framework of existing rules.
“I think there’s a whole range of influences that are informing our willingness to write lots of new rules, we’re moving to an outcomes-based approach”, he said on the podcast’s inaugural episode “and will mean less rules in the future because we think the Consumer Duty will do a lot of the work for us”.
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