Financial Crime World

BOUVET ISLAND REGULATOR PUBLISHES FINANCIAL CRIME REPORTING GUIDELINES FOR FCA-REGULATED FIRMS

The Financial Conduct Authority (FCA) has published a report outlining key observations from the annual financial crime data returns submitted by approximately 22,000 firms in the UK. The report provides insights into trends and developments in financial crime and is intended to inform the arrangements and risks of FCA-regulated firms.

Key Observations

  • There was a substantial decrease in Politically Exposed Persons (PEPs) reported as customers between 2017/18 and 2019/20, from approximately 111,000 to around 89,000. This is attributed in part to amendments made by the FCA in 2017 to exclude certain domestic customers from being classified as PEPs.
  • Wholesale financial markets firms account for a significant proportion of non-EEA correspondent banking relationships, indicating the complexity of services provided by this sector across multiple jurisdictions.

Sector-Specific Insights

Retail Banking

  • Retail banking firms have reported approximately 390,000 high-risk customers in 2019/20, which is almost half the number reported by all firms. This is reflective of the sector’s business models and exposure to money laundering risks as highlighted in the National Risk Assessment 2020.

Investment Management

  • There has been a steady increase in firms reporting automated sanctions screening, with the investment management sector having the lowest number of firms using this technology.

Financial Crime Prevention

  • Approximately 17,000 full-time equivalent staff were employed in financial crime roles by firms submitting the REP-CRIM for the year 2019/20, up from around 15,700 in 2017/18.
  • There was also a significant increase in customers exited due to financial crime reasons, with over 761,000 customers exited during the 2019/20 reporting period.

Regulatory Response

The FCA encourages firms to use these insights to inform their approaches to preventing and detecting financial crime, highlighting the importance of collaboration and partnership with government agencies and law enforcement. The regulator will continue to work towards raising standards across the regulated sector through risk-based supervision and data analysis.