FCA sets out financial crime priorities

The FCA published an update report on reducing and preventing financial crime on 8 February 2024. The purpose of the update is to provide a midpoint summary against the FCA’s three year strategy.

It also summarises four focus areas for the next 18 months, namely data and technology, further collaboration, consumer awareness, and measuring effectiveness and sets out suggested actions for firms. The FCA expects firms to measure their own effectiveness at preventing financial crime through outcomes and metrics.

What does this mean?

The Summary of impact 2022-2023

The FCA previously set out investment fraud and authorised push payment (APP) fraud as its two priorities. The FCA continues to invest in fraud prevention initiatives and work with the Payment Systems Regulator (PSR) to support the mandatory reimbursement of APP fraud, coming into effect in October 2024.

The FCA expects market participants to have proportionate financial crime controls for the business they plan to undertake. New firms without sufficient anti-money laundering (AML) controls will have their applications refused. In 2023, 40% of firms applying to be registered for AML purposes only were rejected, withdrawn or refused, along with over 88% of crypto firm registrations under the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (MLRs).

Future focus areas

On data and technology, the FCA expects firms to ensure that systems and controls keep up with the increasing sophistication of criminal groups. Firms should use an array of technologies to help prevent financial crime and calibrate how they use technology to their individual requirements to be as effective as possible. Firms also need to keep fine tuning their response to combat the changing threat.

The FCA strongly encourages firms and cross-sector partners to participate in data sharing initiatives and explore the latest technologies to improve collaboration.

The FCA expects firms to do their part in raising consumer awareness, as an essential tool in combating financial crime.

The FCA also calls out the need to measure the effectiveness of fraud and money laundering prevention, allowing firms to be clear on the impact their interventions are having. As an example, the FCA notes the PSR’s publication on APP fraud performance data, first published in October 2023.

What do firms need to do?

Firms should actively collaborate with authorities and cross-industry, as well as actively communicate with their customers to prevent financial crime.

Firms should ensure they invest in the latest technology to address key financial crime risks.

Firms should be able to measure their success in preventing financial crime, including comparisons against their peers.

The FCA and other authorities will continue to assess firms’ measures on financial crime prevention and reporting, using their full supervisory toolset.

Firms should work collaboratively with authorities and cross-sector to participate in data sharing initiatives and to ensure firms know how criminals are likely to be using new technologies to target customers and businesses.

Firms need to keep up to date with good practices, targeting investments in technology and data to address key financial crime risks with measurable outcomes. When using third party technologies for detection, the tools must be calibrated to the individual firm’s risk profiles and its customer base.

Raising awareness with customers is key in preventing fraud, but the messaging must be relevant, consistent and appropriate to the customer base. Firms should actively request feedback from customers to ensure their communication is effective.

Firms should be able to measure their own effectiveness at preventing financial crime through using outcomes and comparable metrics. The FCA expects firms to consider how their interventions could contribute towards a reduction in overall rates of financial crime.

“The FCA's continued focus on financial crime, should indicate the need for firms’ to keep their financial crime frameworks under review. For many, this may require further investment.”