The Financial Conduct Authority (FCA) issued a warning to retail banks in May 2021 (made public on 29 June) over continued weaknesses and failings surrounding their financial crime controls.

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It outlined the key issues and weaknesses surrounding retail banks’ financial crime controls and requested that each firm complete a gap analysis of each of the identified weaknesses and take prompt and reasonable steps to resolve them by 17th September 2021.

Several common weaknesses in key areas of firms’ financial crime systems and control framework covered:

• Governance and Oversight
• Risk Assessments
• Due Diligence
• Transaction Monitoring
• Suspicious Activity Reporting

What this means for you

If you are not operating as a retail bank, you can still gain significant learnings from the warning. We provide a brief analysis below on some steps you should be taking to ensure you are meeting your AML requirements.

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Governance and Oversight

• Responsibilities between the first, second and third lines are suitably defined and senior management sign off is required particularly in cases of higher risk factors
• You will need to ensure that your systems and controls are documented, accessible by all staff and suitably audited with senior management sign off

Risk Assessments

• Your firm risk assessment covers specific risks present in the UK. Remember your risk assessment should cover the significant risks that your business is exposed to

Due Diligence

• When onboarding customers or conducting your customer refresh, consider the different types of risks each customer brings from a money laundering or terrorist financing perspective
• Ensure that you apply enhanced due diligence measures in all high-risk situations and can clearly evidence what work has been undertaken for each client

Suspicious Activity Reporting

• Review your SAR processes and establish if it is clear and document how your employees should raise internal SARs to the nominated officer and if this is fully understood by staff

How can we help?

If you have any queries about the FCA’s warning letter or require further understanding of UK AML regulations please contact the team at MEMA.