Last Friday, the Financial Conduct Authority (FCA) published a policy statement outlining key changes to its Financial Crime Guide.

In April 2024, the FCA launched a public consultation on proposed updates aimed at enhancing the UK’s financial crime prevention framework. The Financial Crime Guide offers crucial guidance to firms under FCA supervision, helping them develop robust systems and controls to combat financial crime, including anti-money laundering (AML), counter-terrorist financing (CTF), sanctions compliance, and proliferation financing (PF).

The FCA’s updates seek to address emerging risks, integrate new regulatory requirements, and provide clearer, more actionable guidance based on feedback from the financial services industry.

This article examines the feedback received during the consultation and outlines the key changes the FCA has implemented in response.

Feedback on Key Areas and FCA’s Response

Sanctions Compliance: The FCA clarified key areas, including senior management accountability, cryptoasset businesses, and manual versus automated sanctions screening. Updates focused on terminology, the Guide’s UK-specific scope, and enhanced reporting requirements for significant breaches. Future revisions may feature more case studies and best practices.

Proliferation Financing (PF): Following the 2022 Money Laundering Regulations (MLRs) amendments, PF risk assessment was emphasized. While no separate PF chapter was added, the FCA plans to include examples of good and poor practices based on future findings.

Transaction Monitoring (TM): Revisions highlighted balancing AI with regulatory expectations, offering clearer guidance on AI governance and updated case studies. Respondents welcomed examples of how AI can enhance transaction monitoring.

Cryptoasset Businesses: The Guide now explicitly includes cryptoasset firms, with clarifications to ensure applicability across sectors. Despite requests for tailored examples, the Guide remains industry-neutral.

Consumer Duty: The FCA strengthened links between financial crime controls and Consumer Duty rules, emphasizing firms' obligation to align both for better consumer outcomes.

Economic Crime and Corporate Transparency Act 2023 (ECCTA): Updates highlighted enhanced information-sharing powers under ECCTA, with firms now able to share data to combat economic crime without civil liability, provided GDPR compliance is maintained.

Consequential Changes: Revised self-assessment questions and practice examples reflect UK-specific regulations, updated key personnel roles, and removed outdated EU references.

Future Areas for Consideration

Planned updates include:

• Fraud Prevention: More guidance on APP scams and synthetic identity fraud.
• AI and Machine Learning: Exploration of responsible AI integration.
• Politically Exposed Persons (PEPs): Proportionate approaches to domestic PEP management, pending final PEP guidance updates.

The FCA's Ongoing Commitment to Financial Crime Prevention

The FCA has made it clear that the revisions to the Financial Crime Guide are not a one-off exercise but part of an ongoing effort to refine and update its approach to financial crime supervision. The regulator will continue to gather feedback from firms and other stakeholders, using this input to improve the guide and ensure it remains effective in combating financial crime.

Through these revisions, the FCA is not only aiming to strengthen individual firms’ financial crime controls but also to improve overall market integrity. By providing clearer, more actionable guidance, the FCA hopes to reduce the risk of financial crime, protect consumers, and ensure that UK firms remain globally competitive in a complex regulatory environment.

Conclusion

The FCA’s proposed changes to the Financial Crime Guide reflect a proactive and responsive approach to the evolving landscape of financial crime. The feedback gathered during the consultation process highlights the need for clarity, innovation, and practical guidance in areas such as sanctions, proliferation financing, transaction monitoring, and cryptoasset regulation. With these updates, the FCA aims to empower firms to enhance their financial crime prevention systems while supporting their efforts to navigate emerging risks and regulatory expectations.

Access the full policy here: https://www.fca.org.uk/publication/policy/ps24-17.pdf