AML/CTF/CPF
Industry News
The report highlights supervisory findings, emerging risks and areas for improvement across operational resilience, financial crime controls, artificial intelligence (AI) and conduct oversight.
Key points include:
➡️ Data Management and Financial Crime Controls: Weak data ingestion processes, coding defects and incomplete data monitoring have resulted in undetected financial crime control gaps. Firms should strengthen data lineage, completeness checks and surveillance controls;
➡️ AI Governance and Oversight: The FCA identified weaknesses in AI approval processes, risk classification, testing and human oversight, alongside incidents involving inaccurate AI-generated code and unauthorised AI tools causing data leaks;
➡️ Unregistered Annex 1 Firms: Banks have provided funding and services to businesses operating without required registration under the Money Laundering Regulations 2017 (MLR). Firms should ensure financial crime controls identify and manage risks associated with potentially unlawful activities;
➡️ Securitisation Due Diligence: The FCA highlighted the importance of robust due diligence, particularly for securitisations involving originators outside established regulatory frameworks and assets exposed to fraud or double-pledging risks;
➡️ Client Risk Assessments: Reviews of prime brokerage businesses identified weaknesses in sharing information from (KYC), surveillance, investigations and ongoing monitoring, limiting firms' ability to assess aggregate financial crime and conduct risks; and
➡️ Operational Resilience: The FCA identified gaps in resilience self-assessments, impact tolerance calibration, remediation validation and scenario testing, including the implications of shorter T+1 settlement timelines.
✅ Wholesale banks should review financial crime controls, data governance, AI oversight and client risk assessment frameworks, ensuring effective information sharing, robust monitoring and alignment with the FCA expectations set out in the report.
