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What has happened?

In April 2024, the FCA consulted, in its CP 24/9, on proposed changes to its Financial Crime Guide. This CP is relevant to all FCA financial crime-supervised firms and to firms supervised under the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (MLRs), including cryptoasset businesses.

The objective of the Financial Crime Guide is to enhance understanding of the FCA’s expectations and to help firms assess the adequacy of their financial crime systems and controls and remedy deficiencies.

What are the key points of the Consultation Paper?

Sanctions: Post Russia’s invasion of Ukraine in 2022, the FCA conducted extensive assessments of firms’ sanctions systems and controls. The FCA now proposes to update the sanctions section (Chapter 7) of the guidebook to reflect what the FCA and firms have learned. Insights include, how firms can use Management Information to inform their approach to sanctions, examples of good and poor practices when using screening tools to identify potential sanctions issues, and new guidance on how the FCA expects firms to identify, assess and report potential sanctions breaches using screening tools to identify potential sanctions issues.

Proliferation Financing: The guidance is being updated to ensure Proliferation Financing is explicitly referenced throughout the Guide where appropriate, and to highlight a 2022 update to the MLRs which requires firms to carry out Proliferation Financing Risk Assessments.

Transaction Monitoring: The FCA will set out key guidance for firms on how they can implement and monitor transaction monitoring systems and support responsible innovation and new approaches, such as use of Artificial Intelligence.

Cryptoassets: Cryptoasset businesses registered under the MLRs have been subject to FCA supervision for AML purposes since June 2020. The FCA will explicitly state that Cryptoasset businesses should consult the Guide.

Consumer Duty: the FCA will propose that the Guide makes clear that firms should consider whether their systems and controls are proportionate and consistent with their obligations under the Consumer Duty.

Respondents are asked to submit comments on the CP questions by 27 June 2024.  The FCA plans to publish feedback, along with the final amended text of the Guide, in a Policy Statement.

The Guide does not contain rules and it imposes no new requirements on firms.

How we can help you

Thistle Initiatives has supported firms for a number of years as a trusted compliance and regulatory adviser. In addition to assisting these firms as-and-when, our team of specialists can serve as your right hand in meeting and complying with FCA regulations. We understand the importance of staying up-to-date and compliant and are dedicated to providing the guidance and support needed to do so.

Are you looking for help with your financial crime arrangements, or more general regulatory questions? If so, we can help in any of the following ways;

• Assessing the potential impact of the Guidance on your firm
• Assessing the implications for your firm’s Consumer Duty arrangements
• Advising on amending your compliance monitoring programme where necessary

Contact our specialist team now to schedule a free consultation. Get in touch with us by calling 020 7436 0630 or sending an email to info@thistleinitiatives.co.uk.