Another FCA ‘Dear CEO’ regarding AML

Mar 11th '24

Strengthening Financial Crime Controls: a guide for Annex 1 firms to enhance compliance and integrity.


FCA issues Another “Dear CEO” letter.

In the rapidly evolving landscape of financial regulation, the Financial Conduct Authority (FCA) has issued a critical reminder to Annex 1 firms regarding the importance of robust financial crime controls. This guide aims to provide a comprehensive overview of The FCA’s findings and recommendations, assisting Annex 1 businesses in enhancing their compliance frameworks and safeguarding the integrity of the UK Financial Markets.


The importance of compliance with Money Laundering Regulations

Annex 1 firms, encompassing a range of financial service providers from lenders to money brokers, play a pivotal role in the financial system. Given their unique position, these entities are subject to the Money Laundering, Terrorist Financing, and Transfer of Funds (Information on the Payer) Regulations 2017 (MLRs). Compliance with these regulations is not merely a legal requirement but a cornerstone of maintaining the integrity and trust in financial markets.


Common failings identified by the FCA

The FCA’s recent assessments reveal concerning lapses in the financial crime controls of some Annex 1 firms. Key issues include:


  • Discrepancies Between Registered and Actual Activities: Firms must ensure their registered activities accurately reflect their operational scope to prevent misuse.
  • Outpaced Financial Crime Controls: Rapid business growth necessitates a corresponding scale-up in financial crime defenses.
  • Inadequate Risk Assessments: Proper evaluation of both internal and customer-related activities is crucial to identifying potential risks.
  • Insufficient Resourcing and Oversight: Effective financial crime prevention requires dedicated resources and vigilant oversight.


Actionable steps for compliance enhancement

To address these vulnerabilities, Annex 1 firms are advised to undertake a thorough review of their financial crime controls. Key areas of focus should include:


  • Aligning Registered and Operational Activities: Ensuring consistency between registered services and actual operations is fundamental to compliance.
  • Scaling Controls with Business Growth: As your firm expands, so too should your financial crime prevention measures.
  • Enhancing Risk Assessment Processes: Adopt rigorous methods to assess and mitigate risks associated with your firm’s and your customers’ activities.
  • Bolstering Resources and Oversight: Allocate adequate resources and establish strict oversight mechanisms for financial crime control.


Potential consequences of non-compliance

The FCA has made it clear that failure to address these issues promptly may result in regulatory actions, including enforcement measures. This underscores the regulator’s commitment to combating financial crime and upholding the integrity of the UK’s financial system.



In conclusion, the integrity of the UK financial markets depends significantly on the proactive efforts of annex 1 firms to fortify their financial crime controls. By adhering to the FCA’s guidance, these entities can not only ensure compliance with regulatory requirements but also contribute to the broader fight against financial crime.


If you have AML or KYC/KYB needs, please contact us.


If you need any help with planning, structure, framework, testing, monitoring or past business assessments of cases, call us today!


How we can help

At LS Consultancy, our consultants are industry experts that interpret the rules, regulations and spirit of the industry guidelines by assisting you “the client” in implementing a compliance programme that you can be confident is mitigating the risk of financial crime. What we can do:


  • We analyse the relevant jurisdictions legislation, regulation and industry guidance to ensure that your controls adopt the highest standard possible
  • Analyse and/ or Enhance your Business Wide Risk Assessment to ensure we consider money laundering and relevant predicate crimes
  • Assessment of your Customer Onboarding and/ or Periodic KYC reviews rely on independent documentation and supported by credible information from your customer – as this is key to your compliance programme.
  • Robust Transaction Monitoring and Screening whilst utilising your up-to-date KYC documentation/ information are fundamental.
  • Greater emphasis on training – why not go through live examples with your RM’s, Operational Teams and Compliance – discuss the areas of concern and come up with compliant solutions.
  • Ensuring your Compliance Monitoring Programme is conducted on a regular basis
  • Engagement with senior management through relevant committees


For further information please contact us where our industry experts will be happy to answer your questions.



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