Financial Crime Guide Updates

The FCA’s consultation on amendments to its Financial Crime Guide - particularly to sanctions, transaction monitoring and proliferation financing - aims to support firms in their understanding of the FCA’s expectations around financial crime systems and controls and to be better able to ‘remedy deficiencies.’

There is also clarification that the Regulator expects firms to comply with the Consumer Duty, thinking about how best to support customers throughout their journey.

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RELATED ARTICLES:

Understanding the Latest Updates to CONC

Consumer Duty Board Report: Don’t leave it too late

RELATED RESOURCES:

AML and Financial Crime (2024)

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Sanctions

Updates around sanctions aim to build on what the FCA have learned during their assessment of firms’ systems and controls over the previous three years. A thematic review published in Q2 2022 found gaps in due diligence and compliance frameworks, so it’s no surprise that proposals include further guidance on customer due diligence / know your customer procedures for AML and managing sanctions risks. The proposals also cover governance arrangements and the importance of management information to ensure that sanctions systems and controls are managed and monitored successfully.

The ‘extensive updates to Chapter 7’ will include key findings from their September 2023 assessment of sanctions systems and controls and will include:

• Reporting requirements for firms to report sanctions breaches or if a firm is directly or indirectly subject to any financial sanctions.

• Governance arrangements to oversee sanctions systems and controls, including senior management accountability, oversight of outsourced functions and engagement in public-private and private-private information/best practice sharing.

• Stressing the importance of management information to help ensure that the operation of sanctions systems controls is resourced and monitored effectively.

• Further details around how firms can consider their exposure to potential sanctions regimes and how they can prepare to respond to future sanctions measures in a timely manner.

• Providing more examples of their expectations and of good and poor practice when using screening tools to identify potential sanctions issues.

• New guidance on their expectations around how firms identify, assess and report potential sanctions breaches.

Transaction Monitoring

Transaction monitoring helps firms to understand what normal activity looks like for their business and customers, which in turn helps firms to identify and stop suspicious activity. If firms do use automated systems, they must make sure that the system can identify and flag unusual activity that could be due to money laundering or terrorist financing. New and updated guidance aims to help firms to adopt and maintain their automated transaction monitoring systems with:

• New self-assessment questions and examples of good and poor practice clarifying the FCA’s expectations for firms to ensure that triggers in automated systems are set in a way that is appropriate for the money laundering, terrorist financing and proliferation financing risks the firm faces.

• Good practice of controls around introducing and switching from one automated monitoring system to another and their supervisory expectations that firms should use the information from transaction alerts to inform the risks of individual customers, and as part of their continuous monitoring of the efficacy of their overall control framework.

• Good and poor practice on evaluating the effectiveness of the monitoring system and understanding how it is set up.

• The importance of oversight, resource, and expertise for effective screening in the form of examples of good and poor practice, and self-evaluation questions.

The FCA also plans to include text that reminds firms that, where relevant, the Duty must be considered alongside financial crime obligations. The proposed text offers an example: that firms may wish to consider additional steps in their customer journeys to help prevent fraud and could also consider offering additional customer support such as a real time human interface to deal with security or fraud concerns, engagement with customers during customer due diligence processes or providing information on their application or application outcome from products and services.

From this example, the FCA is asking firms to ensure that information provided to customers is clear and helpful and that customers are offered appropriate support throughout their journey. Engagement with customers during complex or potentially stressful processes means that customers can access support immediately or have the opportunity to seek further information in real time, and transparency offered by clear and timely information can both help to prevent fraudulent applications and ensure that customers are treated fairly and in line with the Consumer Duty.

Our online AML and Financial Crime training course takes learners through the basics of Anti-Money Laundering and Financial Crime, covering types of crimes, responsibilities, legislation, fraud and AML expectations, due diligence, reporting and recording. Each online course, priced at just £20, is accessible at the delegate’s convenience, and provides a certificate upon successful completion, allowing firms to track and record each user’s progress. 

For large groups, we can offer a simplified enrolment service and pricing, simply email Robert.bell@rbcompliance.co.uk.