Last month (June 2024) saw the close of HM Treasury’s consultation paper on Improving the Effectiveness of the Money Laundering Regulations. The fight against money laundering and terrorist financing is intended to be ‘risk based’ and the controls a firm is to implement need to be proportionate.
HM Treasury would like to make customer due diligence “more proportionate and effective”. Whether compliance officers will welcome more latitude when onboarding clients remains to be seen.
Under the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (MLR2017), firms are required to have a written firm-wide risk assessment in place.
Under article 18 of MLR2017: “A relevant person must take appropriate steps to identify and assess the risks of money laundering and terrorist financing to which its business is subject. In carrying out the risk assessment […], a relevant person must take into account” a variety of considerations.
This essentially means that, before a firm can apply ‘risk-based’ measures, it is fundamental that a firm understands what those risks are.
FCA regulated firms that are not subject to the MLR2017 (because they don’t meet the definitions of a ‘relevant person’) are still obliged to maintain comprehensive and proportionate measures to control the risks of financial crime (SYSC 6.3.1R).
Whilst the provisions of the Financial Crime Guide (FCG 2.2.4 – Risk Assessments) and FCA Handbook (SYSC 6.3.6) have set guidance, we are seeing an increasing focus – at application, supervision, and enforcement – on how a firm’s overall policy and systems and controls, are calibrated to the risks it faces.
A firm-wide risk assessment is therefore a key foundation for combatting money laundering.
At Thistle Initiatives, we've been supporting firms for over a decade as a trusted compliance and anti-money laundering regulations advisor. Our team of specialists is dedicated to assisting firms in meeting and complying with FCA regulations, including the conduct of firm-wide risk assessments.
Whether you need help with financial crime arrangements or have general regulatory inquiries, we're here to provide guidance and support. Contact our specialist financial crime 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.