The Financial Conduct Authority (FCA) is proposing significant updates to its Financial Crime Guide. These updates are particularly focused on three key areas: sanctions, proliferation financing, and transaction monitoring. However, the proposed changes don’t stop there. The FCA is also looking to incorporate references to cryptoassets and the Consumer Duty, alongside consequential adjustments throughout the guide.
At the heart of these proposed updates lies a clear intention: to provide clarity and guidance to financial institutions. The FCA aims to assist firms in understanding regulatory expectations while empowering them to assess the adequacy of their financial crime systems and controls. These proposed changes also seek to remedy any deficiencies that may exist within current frameworks, ultimately strengthening the resilience of the financial sector against illicit activities.
The proposed updates to the Financial Crime Guide (FCG) are multifaceted, each aimed at addressing specific challenges and aligning with emerging trends in financial crime prevention. Here are the main updates proposed by the FCA and their implications for regulated firms:
Sanctions: enhancing control and compliance
In response to geopolitical events such as Russia’s invasion of Ukraine, the FCA is proposing more rigorous controls and checks concerning sanctions. The aim is to increase the obligation on firms to identify and block financial transactions that may breach international sanctions. The proposal emphasises the importance of notifying the FCA of sanctions breaches, ensuring transparency and compliance with regulatory expectations.
Proliferation financing: strengthening risk assessments
The FCA underscores the necessity for firms to develop specific risk assessments and control mechanisms to prevent financial services from being exploited for the proliferation of weapons of mass destruction. This involves implementing more stringent oversight and reporting processes, aligning with the 2022 update to the Money Laundering Regulations (MLR).
Transaction monitoring: improving detection and reporting
There’s a push for improved systems to detect and report suspicious transactions effectively. Firms are encouraged to consider the appropriateness of using advanced analytical tools to handle the growing volume and complexity of financial transactions. The FCA maintains that automated monitoring is necessary only where appropriate for the size and nature of the business.
Cryptoassets: adapting to digital innovations
With the rising prominence of cryptoassets, the FCA proposes clearer guidelines for cryptoasset businesses to ensure compliance with anti-money laundering and counter-terrorist financing laws. This includes references to the travel rule and updates to sections on risk assessment and fraud. The FCA expects registered firms under the MLR as cryptoasset businesses to align with the FCG when designing financial crime systems and controls.
Consumer Duty: prioritising consumer protection
The proposed inclusion of expectations for firms to act in the best interests of consumers reflects the FCA’s commitment to consumer protection. Firms are encouraged to evaluate whether their financial crime systems align with their responsibilities under the Consumer Duty. This includes measures to stop fraud and provide additional support to customers, promoting transparency and fairness in financial dealings.
Consequential changes: keeping pace with evolution
The FCA proposes other changes to ensure the guide remains current, including refreshed links within the FCG and updated examples of good and poor practice.
Implications for regulated firms
The proposed changes necessitate updates to compliance and risk management frameworks. Firms may need to repeat or update risk assessments, implement new training programs, invest in technology, and re-evaluate existing client relationships and procedures. It’s important to note that while the FCG provides valuable guidance, it must be read alongside existing laws, rules, and guidance on financial crime.
How Neopay can help
Amidst the proposed updates to the Financial Crime Guide by the FCA, firms face the challenge of adapting their compliance frameworks. Neopay offers expert guidance and customised solutions to assist firms in navigating these changes seamlessly. With a focus on tailored support, we ensure that firms stay ahead of regulatory expectations while mitigating financial crime risks effectively.
In addition to our assistance in navigating the FCA authorisation process, we offer an Integrated Managed Service designed to streamline compliance operations for firms. Our comprehensive solution provides ongoing support in maintaining regulatory compliance, from initial authorisation to ongoing reporting and risk management. Our Integrated Managed Services saves you money and frees board time to focus on core business innovations, development and growth.
The consultation period for the proposed updates to the Financial Crime Guide closes on 27 June 2024. We encourage our clients to actively participate in the consultation process and share their feedback.
To find out more about how we can support your business, contact us here.
