FCA finds 'common weaknesses' in platforms' money laundering, bribery and corruption risk management

The regulator said most of the 22 wealth and asset management firms, fund administrators and platforms it assessed had "relatively well-developed arrangements" but said that some were unable to show that senior managers have effective oversight and scrutiny over regimes. It also highlighted a number of other shortcomings it had identified during its thematic review (19-page / 773KB PDF).

"We found that AML (anti-money laundering) controls varied across the sector; there were areas where some firms understood and met their obligations, and others where improvement was needed," the FCA said in its report. "However, there is still work for most firms to do to ensure bribery and corruption risks are appropriately mitigated. Given our strong regulatory focus and previous publications on AML and ABC (anti-bribery and corruption) we expected firms to have taken more action to ensure their controls reduced the risk of money laundering and bribery and corruption."

"Our findings were of particular concern where the firms were part of major financial groups, which should have been aware of our expectations. In some cases, the firms we visited were from groups that had been subject to previous regulatory attention but we still found significant weaknesses," it added.

Amongst its findings, the FCA said that some companies deemed a longstanding business relationship as being a substitute for maintaining up-to-date customer due diligence information. It also said that some companies had "inconsistent or absent controls" for assessing, classifying and recording risks posed by new customers. This meant that some high-risk customers were not subject to "enhanced due diligence and enhanced on-going monitoring" checks, it added.

The FCA also said that most of the companies it reviewed failed in some respect with how they acted on the outcomes of risk assessments. It said identified risks were "often non-measurable and not actively monitored" and that, as a result, appropriate controls were sometimes not in place to mitigate those risks.

Other failings were found in the checking process for determining the legitimacy of the source of customers' funds and wealth, and most companies were also unable to show that the systems and controls they have in place for assessing bribery and corruption risks are adequate to pick up on issues stemming from third party relationships involving "agents or introducers", for example.

Despite having "well-established" staff training programmes in place for conducting AML and ABC compliance checks, the FCA said the "effectiveness of this training" had to be called into question as a result of the findings of its review.

"Firms should develop more ‘tailored’ training material focusing on risks specific to their business," it said. "Most firms had appropriate arrangements to govern training, including monitoring staff completion activity and incentivising staff to adhere to training requirements through performance management protocols."

The FCA said it expects businesses to act on its findings and "improve their AML and ABC frameworks where necessary".