The FCA has found wholesale brokers need to enhance their systems, controls, risk awareness and training to guard against money laundering.
The FCA focused on wholesale brokers in its review because of the important role they play in capital markets in facilitating deals.
The regulator also engaged with other market participants to understand wider risks, issues and good practice, recognising that collaboration with and across industry is essential to delivering real improvements. This report will assist any firms involved in the capital markets to improve their controls and prevent financial crime.
Good progress has been made since the FCA’s Thematic Review in 2019, including with customer risk assessments, onboarding processes, governance and oversight, and collaboration between trade surveillance and transaction monitoring teams.
However, the FCA identified areas where firms needed to improve to better protect against money laundering, including:
an underestimation of the risks of money laundering firms are exposed to
over-reliance on others in the transaction chain completing appropriate due diligence checks on customers
limited information sharing between firms
insufficient awareness of the money laundering through the markets suspicious activity reports glossary code
Steve Smart, joint executive director of enforcement and market oversight, said: ‘The flow of capital is an essential part of a thriving and competitive market, but tainted cash must not be allowed to pollute the rest.
‘For the UK financial services industry to grow, investors and institutions need to have trust in it. Integrity is vital for that, and firms play a key role in helping to detect criminal activity.
‘Firms need to keep their controls under review and ensure they are effective against financial crime. This report will help them do that.’
The FCA will continue to work closely with firms, industry and law enforcement to improve understanding and sharing of information about emerging risks and to encourage greater innovation by firms with transaction monitoring.
