FCA Updates Findings on CDD, EDD and Monitoring Controls

The review aims to raise standards across firms by sharing examples of good practice and highlighting key failings identified across firms.

The outcome of the review focusses on 3 core areas:

1. Policies & procedures,
2. CDD and EDD processes, and
3. Compliance monitoring and audit.

Key failings highlighted in the findings include:

❌ Policies and procedures lack sufficient detail including undefined periods for periodic reviews and alternative methods for ID&V;

❌ Failure to document key pieces of information, such as the purpose and intended nature of the business relationship, or the completion of EDD measures;

❌ Weak governance, including unclear requirements on senior management approval; and

❌ Lack of independent second-line assurance, with the same staff responsible for onboarding and review.

Firms should take actionable steps to align with the best practice outlined in the findings, including:

✅ Adopting a purposeful approach to CDD/EDD, with requirements linked to regulatory obligations and clear rationale;

✅ Enabling exceptions and failure management, including the effective use of alternative forms of ID&V;

✅ Maintain a tailored approach to EDD ensuring the additional requirements to CDD are clear and measures are evidencable;

✅ Avoid a tick-box approach and ensure the purpose of CDD/EDD is clearly ‘lived’ in practice with any gap robustly identified and reported through the appropriate governance forums; and

✅ Use of independent assessments to review CDD processes, alongside established internal audit reviews of CDD systems and controls.

💡 Plenitude’s Advisory & Transformation Services support firms in conducting independent assessments to proactively identify control gaps and strengthen CDD/EDD frameworks. Visit our website for more information: https://www.plenitudeconsulting.com/services/advisory-and-transformation