- with readers working within the Securities & Investment industries
Niall Hearty of Rahman Ravelli considers the findings of a Financial Conduct Authority survey.
Two-thirds of corporate finance firms not required to submit financial crime returns may be falling short of money laundering rules, according to a survey carried out by the Financial Conduct Authority (FCA).
The survey found that such firms were failing when it came to at least one element of their anti-financial crime control frameworks. Of those firms that responded to the survey, 11% said they had no documented business-wide risk assessment - which is a requirement under the Money Laundering Regulations.
These findings prompted the FCA to stress that firms without a business-wide risk assessment are making themselves (and others in the market) vulnerable to money laundering, fraud and other forms of financial crime.
Other findings from the survey, included:
- 10% of firms said they did not retain documented evidence of customer due diligence.
- 29% of principal firms (firms authorised by a regulator that have a contract with one or more appointed representatives) said they did not conduct financial crime risk assessments for their appointed representatives.
- 6% of principal firms were not monitoring their appointed representatives' compliance with financial crime regulations or conducting on-site visits or audits.
But the survey did identify some examples of good practice, with some firms updating their business-wide assessments to reflect emerging risks and using management information to strengthen financial crime controls. Of those surveyed, 97% said they regularly report financial crime concerns to senior management.
Even if a business does not have to submit financial crime returns, it is good practice to ensure it has robust systems in place to protect against money laundering and other financial crime risks. The FCA's findings should serve as a warning that a high proportion of firms are potentially exposed - and should review their internal governance and implement risk oversight accordingly.
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