Money laundering through financial markets remains a critical concern, with criminals exploiting the complexity and speed of transactions to disguise illicit funds. The latest January 2025 review, conducted by regulatory authorities, provides an updated assessment of the current risks, best practices, and next steps to combat this evolving threat.

What’s New in This Review?

The 2025 review builds on findings from the earlier 2019 thematic review (TR19/4) and offers fresh insights into MLTM risks, controls, and regulatory expectations. Key new elements in this report include:

Updated Risk Assessment

• The report highlights emerging trends and evolving typologies of MLTM, emphasizing the growing sophistication of criminal tactics.
• It discusses the impact of recent regulatory changes, such as the Economic Crime and Corporate Transparency Act 2023 (ECCTA), and how firms can leverage new information-sharing provisions.

Increased Focus on Wholesale Brokers

• A deeper examination of wholesale brokers and their vulnerabilities, with specific attention to their role in global transaction chains and market access facilitation.
• Findings indicate a need for better oversight and due diligence among brokers due to their discretionary role in arranging trades.

Transaction Monitoring Enhancements

• A significant challenge noted in the review is the continued difficulty in detecting suspicious activities due to the high volume of trades and reliance on outdated monitoring systems.
• The report urges firms to integrate transaction monitoring (TM) with broader risk management processes and highlights the importance of leveraging technology and cross-team collaboration.

Governance and Oversight Developments

• Firms are expected to strengthen their governance frameworks by enhancing senior management engagement and establishing clearer accountability structures.
• The review emphasizes the importance of tailored financial crime training for different roles within firms.

Case Studies and Best Practices

• The report provides real-world case studies illustrating common money laundering tactics, such as mirror trading, wash trades, and free-of-payment transfers.
• Practical examples of effective controls and red flags are outlined to help firms refine their anti-money laundering (AML) frameworks.

Call for Collaboration and Innovation

• A renewed call for public-private cooperation to address gaps in information sharing and enforcement.
• Encouragement for firms to adopt innovative RegTech solutions to better detect and prevent MLTM.

Next Steps for Firms

The review stresses that firms must take a proactive approach to MLTM by:

• Conducting comprehensive Business-Wide Risk Assessments (BWRA) that reflect their exposure to financial crime risks.
• Enhancing Know Your Customer (KYC) and Customer Due Diligence (CDD) processes to identify and monitor high-risk clients effectively.
• Improving suspicious activity reporting (SARs) by aligning with the UK Financial Intelligence Unit's (UKFIU) guidance and codes.

Conclusion

The January 2025 review underscores the need for continuous vigilance and adaptation to emerging risks in financial markets. Firms must invest in robust AML systems, enhance regulatory compliance, and foster collaboration to stay ahead of criminals exploiting market vulnerabilities.

Read the full FCA: Assesing and reducing the risk of Money Laundering Through Markets (January 2025)