LONDON, England – A recent survey found that two-thirds of corporate finance firms not required to submit financial crime returns may be falling short of money laundering rules.
Corporate finance firms help businesses raise money by connecting them with investors or lenders and are vital to the growth and success of the UK economy – making effective financial crime controls essential.
Eleven percent of responding firms reported having no documented business-wide risk assessment, which is a requirement under the Money Laundering Regulations. Without a business-wide risk assessment, firms are leaving themselves and the wider market vulnerable to money laundering, fraud and other forms of financial crime.
Other findings from the survey that highlighted areas for improvement included:
- 10 percent of firms stated they did not retain documented evidence of customer due diligence.
- 29 percent of principal firms said they did not conduct financial crime risk assessments for their appointed representatives.
- 6 percent of principal firms reported not monitoring their appointed representatives’ compliance with financial crime regulations or conducting on-site visits or audits.
The Financial Conduct Authority (FCA) also identified examples of good practice. This encompassed firms regularly updating their business-wide assessments to reflect emerging risks, plus using detailed management information to strengthen financial crime controls. 97 percent of survey respondents also said that they regularly report financial crime concerns to senior management.
Andrea Bowe, director of the specialist directorate at the FCA, said:
“Corporate finance firms play a vital role in the UK’s capital markets. Their exposure to money laundering risks means it is essential that they have strong, proactive controls in place. While some firms may be meeting expectations, many may be falling short of minimum regulatory requirements.
“We are sharing our findings so firms can address any gaps in their control frameworks. We are also writing to potentially non-compliant firms to set out improvements they need to make.”
The survey is part of the FCA’s wider strategy to fight financial crime. It is one of several initiatives planned over the next five years to strengthen oversight and raise standards across the financial services sector.
