FCA proposes updates to Financial Crime Guide
On 24 April 2024 the FCA published a consultation paper (CP24/9) proposing updates to the Financial Crime Guide.
The aim of the changes is to make it easier for firms to understand what is expected of them, assess the adequacy of their financial crime systems and controls and to help in remedying any deficiencies. The FCA has included self-evaluation questions and examples of good and poor practice they have come across from other work and financial crime publications which can be used when looking at updates of changes needed to a firm’s own policies and procedures.
These updates look to address and reference more recent changes within the regulatory space but will remain free from rules and does not impose any new requirements on firms.
The proposed areas of change are:
Sanctions: The proposal is to update the guide to reflect what has been learnt by the FCA and firms about sanctions systems and controls in the wake of Russia’s illegal invasion of Ukraine in 2022. For example, the Guide will include new guidance on expectations of how firms identify, assess and report potential sanctions breaches as well as information on the sanctions breaches reporting requirements.
Proliferation Financing (PF): The proposed update will ensure PF is explicitly referenced throughout the Guide where appropriate, and to highlight a 2022 update to the MLRs which requires firms to carry out PF Risk Assessments.
Transaction Monitoring: The plan will be to set out some key guidance for firms on how they can implement and monitor transaction monitoring systems and support responsible innovation and new approaches, such as use of Artificial Intelligence. This will include examples of good and poor practice to help firms in adopting and maintaining automated monitoring systems.
Cryptoassets: FCA has been the supervisor of cryptoasset business since 2020 and the Guide will be updated with specific requirements and expectations for these firms e.g the requirement to comply with the Travel Rule.
Consumer Duty: As a further example of how FCA see Consumer Duty as being relevant to almost everything firms do, specific mention is made to Consumer Duty. FCA make the point that financial crime systems and controls can directly protect consumers and their money, and as such will be updating the Guide to reference the Consumer Duty. Firms are expected to ensure their financial crime systems and controls are adequate and proportionate, and consistent with the Consumer Duty.
Other Changes: There will be some other consequential changes to the Guide, including replacing expired links, outdated references to European Union rules and refreshed case studies drawing from more recent FCA enforcement notices.
The consultation paper is relevant to all FCA financial crime supervised firms and those supervised under the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (MLRs), including cryptoasset businesses.
Firms are recommended to review the updates to the Guide and where relevant, update policies and procedures. Also, the more recent FCA enforcement notices that have been added could also be a useful reference for any upcoming annual financial crime refresher training.
If you have any questions on this update, please get in touch.
The deadline for comments and feedback is 27th June 2024 and you can use the online form or write directly to the FCA by email.