FCA consults on Financial Crime Guide updates

What does this mean?

The FCA expects firms to have read and considered the FCG and to use their judgement on how it may help them to comply with their legal and regulatory obligations on financial crime prevention. 

The FCG does not contain rules or impose new requirements, but it provides guidance, self-evaluation questions and examples of good and poor practice based on the FCA's work and other sources. 

The proposed updates are intended to ensure that the FCG remains clear, relevant and useful for firms in identifying and addressing the financial crime risks they face, while serving their customers and markets. 

The main areas of proposed changes in the FCG are:

•  Proliferation financing: The FCG is updated to explicitly reference proliferation financing (PF) throughout the guide where appropriate, and to highlight a 2022 update to the MLRs which require firms to carry out PF risk assessments. The update also provides guidance on how firms can identify and mitigate PF risks, especially in relation to trade finance and cryptoassets.
• Sanctions: Post Russia’s illegal invasion of Ukraine, the FCA conducted extensive assessments of firms’ sanctions systems and controls. It proposes to update this section to reflect what has been learned.
• Transaction monitoring: The FCA is setting out some key guidance for firms on how they can implement and monitor transaction monitoring systems and support responsible innovation and new approaches, such as the use of artificial intelligence. The FCA also provides examples of good and poor practice in relation to transaction monitoring, including the use of blockchain analytics for cryptoasset businesses.
• Cryptoassets: The consultation paper makes explicit that cryptoasset businesses registered under the MLRs should consult the FCG and apply its guidance to their financial crime systems and controls. It also provides specific guidance on how cryptoasset businesses can comply with the 'Travel Rule', which requires them to collect, verify and share information about cryptoasset transfers.
• Consumer Duty: The FCA is proposing that the FCG makes clear that firms should consider whether their systems and controls are proportionate and consistent with their obligations under the Consumer Duty, which came into force for open products and services in July 2023. It also suggests some additional steps that firms may take to help prevent fraud and support customer journeys.
• Consequential changes: The FCA is looking to make consequential changes to the FCG, including replacing expired links, outdated references to European Union rules and refreshed case studies drawing from more recent FCA enforcement notices.

What do firms need to do?

Firms should assess the adequacy of their current financial crime systems and controls and identify any gaps or areas for improvement in light of the proposed guidance. 

Firms should consider how they can implement the guidance in a way that is appropriate and proportionate to their business model, customer base, product range and risk profile.

Firms should actively monitor the FCA's publications and communications on financial crime and keep their systems and controls under review as the regulatory landscape evolves.

Next steps

The consultation closes on 27 June 2024. The FCA will publish its feedback, along with the final amended text of the Guide, in a Policy Statement in due course.