A recent survey found that two-thirds of corporate finance firms not required to submit financial crime returns may be falling short of money laundering rules.
Corporate finance firms help businesses raise money by connecting them with investors or lenders and are vital to the growth and success of the UK economy – making effective financial crime controls essential.
11% of responding firms reported having no documented business-wide risk assessment, which is a requirement under the Money Laundering Regulations. Without a business-wide risk assessment, firms are leaving themselves and the wider market vulnerable to money laundering, fraud and other forms of financial crime.
Other findings from the survey that highlighted areas for improvement included:
- 10% of firms stated they did not retain documented evidence of customer due diligence.
- 29% of principal firms said they did not conduct financial crime risk assessments for their appointed representatives.
- 6% of principal firms reported not monitoring their appointed representatives’ compliance with financial crime regulations or conducting on-site visits or audits.
The FCA also identified examples of good practice. This encompassed firms regularly updating their business-wide assessments to reflect emerging risks, plus using detailed management information to strengthen financial crime controls. 97% of survey respondents also said that they regularly report financial crime concerns to senior management.
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 is part of the FCA’s wider strategy to fight financial crime[2]. It is one of several initiatives planned over the next 5 years to strengthen oversight and raise standards across the financial services sector.
Notes to editors
- Read our survey findings[3] (based on survey responses from 270 corporate finance firms).
- Under the Money Laundering Regulations[4], firms must maintain documented business-wide and customer risk assessments and ensure ongoing monitoring of client relationships.
- An appointed representative (AR) carries on regulated activity under the responsibility of an authorised firm, known as 'the principal'. Principal firms are responsible for making sure the AR is fit and proper and complies with our rules. They must have effective oversight of their ARs, and robust, documented controls that cover their ARs, including managing financial crime risks.
- In August 2022, the FCA introduced new rules[5] to strengthen the appointed representatives regime, including stricter oversight, clearer supervision expectations and enhanced reporting. These came into effect on 8 December 2022.
- In September 2024, the FCA published examples of good and poor practice[6] based on a review of how firms were applying the 2022 rules. The findings highlighted areas of improvement including self-assessments, annual reviews, onboarding processes and oversight of appointed representatives.
- Read more about responsibilities as a principal firm overseeing an appointed representatives[7].