The Financial Conduct Authority launched a consultation on April 25 on its proposed updates to its Financial Crime Guide.
First published in 2011, the FC Guide does not set any rules or impose new requirements on companies. Rather, its purpose is to set the FCA’s expectation of what good looks like, enabling companies to assess the adequacy of their financial crime programmes.
In the consultation document, the regulator has again highlighted the enormous damage financial crime does to our society, undermining market integrity and consumer confidence, and confirmed its commitment to tackle and reduce financial crime through supervision.
This continues the theme in the FCA’s business plan for 2024-25 published on March 19 2024, where the first of the its 13 public commitments is reducing and preventing financial crime through proactive, data-led supervision and enforcement.
The regulator says the updates to the FC Guide are key to reducing financial crime, and while I think some of the updates could go further, I expect the results of the consultation to confirm they are undoubtably helpful and will be a welcome addition to the tools available to fight financial crime.
They will provide much-needed guidance and support to those who will need to evidence they are taking the right steps to combat financial crime. We are hopeful that this, coupled with the FCA’s increasing use of artificial intelligence technology in its new proactive, data-led approach, will make a real dent in the widespread damage caused by financial crime.
Financial crime is changing rapidly and so the FC Guide seeks to assist companies to update their financial crime systems and controls to keep pace. The updates cover a myriad financial crime areas, and in this article I look at two of the main areas: sanctions and transaction monitoring.
Sanctions
Following Russia’s invasion of Ukraine in 2022, the size, scale and complexity of sanctions imposed by the UK government has been unprecedented and the FCA has matched this by increasing its focus on companies' sanctions systems and controls.
The regulator assessed the sanctions compliance of more than 170 companies, publishing its findings on September 6 2023, and the proposed changes to the FC Guide set out the high-level systems and controls it expects the companies it supervises to implement.
The updated FC Guide states that the FCA expects companies to treat sanctions risk in the same way it does all other risks. It expects a robust governance framework to be in place that has at its core the requirement for senior management to take clear responsibility for, and be actively engaged in, complying with sanctions requirements.
The FCA stresses the importance of senior management receiving regular and ad hoc management information to provide it with a clear understanding of the company’s sanctions compliance risk.
