On July 19, the United Kingdom Financial Conduct Authority (FCA) published its annual report on Anti-Money Laundering (AML) for 2017-2018 (year ending March 31). As the conduct regulator for more than 58,000 financial services firms and financial markets in the United Kingdom and the prudential regulator for more than 18,000 of those firms, the FCA plays a leading role in overseeing and ensuring AML compliance in the United Kingdom financial sector.
Key points in the FCA report include the following:
- Policy Developments: With regard to the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (MLRs 2017), which came into effect on June 26, 2017, the FCA issued a policy statement, consulted on updating its guidance for industry to reflect those changes, and published guidance on how firms that the FCA supervises that are subject to the requirements of the MLRs 2017 should treat customers who meet the definition of a politically exposed person (PEP).
- OPBAS: In 2017, the United Kingdom Government announced its decision to create an Office for Professional Body Anti-Money Laundering Supervision (OPBAS) to oversee professional body supervisors (PBSs) for AML. As the report notes, OPBAS, housed within the FCA, is intended to “ensur[e] a robust and consistently high standard of AML supervision across the legal and accountancy sectors.” The FCA reported that it published a sourcebook about OPBAS for PBSs, completed introductory visits to the PBSs, and conducted a comparative review of the data returns that the professional bodies submitted to UK Treasury. It added that it began “an initial round of visits to all PBSs to assess their approach to supervision and will take action where we find weaknesses,” before moving to a risk-based approach for its oversight. [Note: DTG will discuss OPBAS at greater length in the near future.]
- AML Supervision: The FCA stated that it continues to take a risk-based approach to AML supervision.
- Findings and Outcomes: The FCA highlighted a number of accomplishments in its supervisory work:
- Systematic AML Programme (SAMLP): The SAMLP, which began in 2012, is the FCA’s program of “regular, thorough scrutiny” of 14 major retail and investment banks operating in the United Kingdom and overseas operations which have higher risk business models or are strategically important. The FCA reported that it began conducting second-round reviews of those firms in 2017-18. Notably, in all of its second-round reviews, the FCA reported that it “found weaknesses in firms’ anti-bribery and corruption framework. This may be because they have been focusing on their AML controls. We made clear to them that they must ensure they manage and mitigate all their financial crime risks at all times.”
- Regular AML inspections of other high risk firms: The FCA stated that it continued “to find deficiencies, some serious, in some firms, mostly smaller overseas banks.” These deficiencies included ineffective application of enhanced due diligence, flaws in firms’ design of processes and allocations of responsibilities to staff, and failure of firms’ internal auditors to test the effectiveness of AML controls over high risk business.
- Financial Crime Risk Assurance Programme: The FCA reported that this pilot program — which involved making AML and sanctions visits to, or desk-based reviews of, 100 firms from sectors that it considered presented lower inherent money laundering risk – has now been made permanent.
- Thematic and multi-firm work: With regard to enforcement, the FCA reported that it is currently investigating around 75 firms and individuals for AML issues, and that many of those investigations are using both FCA civil and criminal powers under the Financial Services & Markets Act and the MLRs 2017.
- Financial crime data return: The most recent financial crime data return, which all firms subject to the MLRs 2017 (including all deposit takers, but excluding all other firms with revenue of less than £5 million), must complete, shows the following breakdown of customers (total and by region):
- Total: 548,678,586
- Region: Europe – 542,734,646; Asia – 1,846,279; North America – 1,104,322; Oceania – 1,033,250; Middle East and Africa – 921,599; South America – 850,564; Central America – 187,926
- Working with Partners to Combat Money Laundering: The FCA summarized its collaboration with domestic law enforcement agencies, Government, and other regulators to support its investigations, develop operational and strategic analysis, and identify risk. It also noted its contributions to the work of multi-agency groups, such as the Panama Papers Taskforce’s Joint Financial Analysis Centre (JFAC) and the Joint Money Laundering Intelligence Taskforce (JMLIT), and its involvement in the design of the National Economic Crime Centre (NECC) that was created at the end of 2017.