Financial Crime Oversight in Corporate Finance Firms Shows Gaps, Says FCA

A Financial Conduct Authority (FCA) survey has found that two-thirds of corporate finance firms not currently required to submit financial crime returns may be falling short of their obligations under the Money Laundering Regulations, raising concerns about weak oversight and inconsistent compliance practices.

Corporate finance firms play a critical role in supporting the growth and success of the UK economy by helping businesses secure investment and lending. However, the FCA’s findings suggest that significant gaps remain in firms’ financial crime frameworks, with some failing to implement the most basic controls.

According to the survey, 11% of firms reported having no documented business-wide risk assessment – a key regulatory requirement. Without such assessments, firms risk exposing themselves and the wider market to money laundering, fraud and other illicit activity.

Other notable weaknesses identified included:

• 10% of firms failing to retain documented evidence of customer due diligence.

• 29% of principal firms not conducting financial crime risk assessments for their appointed representatives.

• 6% of principal firms not monitoring their appointed representatives’ compliance with financial crime regulations or conducting on-site audits.

Despite these shortcomings, the FCA highlighted examples of good practice, including firms that regularly update their business-wide assessments to reflect emerging risks and those that use detailed management information to strengthen oversight. Encouragingly, 97% of respondents said they report financial crime concerns to senior management on a regular basis.

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 forms part of the FCA’s broader strategy to combat financial crime and strengthen oversight across the financial services sector. Over the next five years, the regulator plans to roll out further initiatives aimed at improving governance, transparency and compliance within firms exposed to heightened financial crime risks.

Read the press release here.