FCA Reviews Financial Crime Controls Across Asset Managers

Key points include:

➡️ Higher-Risk Business Models: Firms active in private markets were more likely to present heightened financial crime risks due to complex ownership structures, international fund flows, high-risk customers and the use of intermediaries;

➡️ Risk Assessments: Over one-fifth of firms had not completed, or had inadequate, Business-Wide Risk Assessments (BWRA), with some failing to assess the inherent financial crime risks arising from their activities;

➡️ Detection & Monitoring Weaknesses: The FCA identified gaps in customer due diligence (CDD), ultimate beneficial ownership (UBO) verification, oversight of outsourced CDD/EDD activities, transaction monitoring, and ongoing screening for sanctions, Politically Exposed Persons (PEPs) and adverse media, with more than a quarter of firms lacking a formal transaction monitoring process;

➡️ Governance & Oversight: Many firms had part-time or shared Money Laundering Reporting Officer (MLRO) responsibilities, limited board discussion of AML risks and insufficient investment in financial crime systems and controls; and

➡️ Training: Although most firms provided financial crime training, the FCA identified examples where MLROs had not received training specific to their legal responsibilities or emerging financial crime risks.

✅Firms should consider the FCA's findings in the context of their own business model and activities, assess whether their financial crime controls remain proportionate to their inherent risk profile, and address any gaps in their financial crime control framework.

💡 The gaps the FCA describes here - inadequate BWRAs, weak transaction monitoring, thin MLRO capacity - are typically what we see trigger a Section 166 #s166 review in practice. Plenitude has direct experience supporting asset and wealth managers through financial crime s166 reviews and sits on the FCA's Skilled Person Panel across Financial Crime, Market Abuse, Conduct, Consulting and Resource Augmentation. Visit our website or reach out directly to one of the team for more information: https://www.plenitudeconsulting.com/services/s166-skilled-person https://www.plenitudeconsulting.com/services/s166-skilled-person