Financial Conduct Authority Clarifies Financial Crime Reporting Requirements

The Financial Conduct Authority (FCA) has issued guidance notes to clarify its financial crime reporting requirements, following feedback from firms.

Definition of “Customer”

In response to industry comments, the FCA has adjusted the definition of “customer” for the purpose of completing the return. Firms are now required to interpret “customer” as defined in the FCA Handbook.

Geographical Divisions and Jurisdiction Categorization

The authority has restructured the geographical divisions within the return and added a separate annex to provide guidance on how jurisdictions should be categorized under this breakdown.

Customer Location Reporting

Additionally, the FCA has clarified that where a customer has multiple addresses, the customer location should be reported as the primary correspondence address determined by the firm. Where the customer relationship is a trust, the location should be reported as the jurisdiction within which the trust is domiciled.

Scope of Financial Crime Return

The guidance notes have also been extended to clarify that the information requested in the Financial Crime Return only applies to those areas of a firm’s business subject to the Money Laundering Regulations (MLRs).

Clarifications on Specific Questions

• Question 18: “Customer relationships refused or exited for financial crime reasons”
  • Figures should not include customers refused due to failed Immigration Act checks.
  • Where a CIFAS marker indicates that a personal customer is linked to fraud and this is the reason for refusal or exit, this should be included within the figure.
• Question 24: “Financial crime risk”
  • The authority has removed the “reputational risk” element from question 24, which will now focus solely on financial crime risk.
  • The FCA has decided not to sub-divide question 18 by types of financial crime, citing potential operational complexity and subjectivity.

Suspicious Activity Reports (SARs)

• Question 19C: “Number of consent SARs submitted”
  • The authority has adjusted question 19C to request the number of consent SARs submitted rather than a percentage of the total number of SARs.
  • The FCA is interested in gathering data on consent issues identified by firms rather than whether these requests were subsequently granted or refused.

MLRO Report and Reporting Burden

• Collation of SAR Information
  • The FCA has clarified that SAR information is collated at year-end to inform completion of the annual Money Laundering Reporting Officer (MLRO) report.
• Reporting Burden for Smaller Firms
  • The authority has taken into account concerns about reporting burden for smaller firms.