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FCA’s latest Letter to the CEO on AML standards and expectations is out

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Key aspects:

The document outlines the Financial Conduct Authority's (FCA) concerns and directives regarding common failings in anti-money laundering frameworks among UK financial institutions, particularly those classified as Annex 1 firms. 

The FCA has observed shortcomings in business models, risk assessment, due diligence, ongoing monitoring, policies, procedures, governance, management information, and training. 

It offers concrete steps on the remediation programs. 

Essential aspects from the document

Common Weaknesses Identified: The FCA's assessments reveal inadequacies in various areas:

Business Model: Misalignments between registered and actual activities, and failure to adapt financial crime controls to business growth.

Risk Assessment: Insufficient business-wide and customer risk assessments.

Due Diligence, Ongoing Monitoring, Policies, and Procedures: Ambiguity and lack of detail in policies, leading to non-compliance.

Governance, Management Information, and Training: Inadequate resources for financial crime teams, insufficient training, and lack of a clear audit trail for financial crime-related decisions.

Actions to be Taken:

Gap Analysis: Firms are expected to conduct a gap analysis against the outlined weaknesses within six months and take prompt steps to address any discrepancies.

Senior Management Responsibility: The analysis should be overseen by a senior manager with enough authority to ensure effectiveness, and findings should be shared internally and acted upon.

Future Engagements: The FCA will request findings from the gap analysis, evidence of action taken, and progress on remedial work in future engagements.

Regulatory Intervention: Failure to adequately address the highlighted issues may lead to regulatory interventions, including enforcement actions ranging from third-party reviews to fines and the possible removal of Annex 1 firm registration.

This document underscores the FCA's commitment to bolstering financial crime controls within the financial sector. Firms are urged to reassess and enhance their policies, controls, and procedures in line with regulatory expectations to mitigate the risks and implications of financial crime.

The full document can be accessed by following this link.