FCA Introduces New Financial Crime Reporting Rules

A report published last year by the Treasury and Home Office concluded that the size and complexity of the UK financial sector puts it more exposed to financial crime than many other jurisdictions. Reducing and preventing financial crime has always been one of the FCA’s key priorities and the regulator is now further increasing its efforts to counter fraud and money laundering.

As part of combating financial crime the FCA relies on firms to provide information about how they manage and reduce financial crime risks. Previously this has been collected in an ad hoc way, or from MLRO reports. From the end of 2016 around 1,400 banks, investment firms and intermediaries will be required to file an annual financial crime return. It is intended that this more regular and more standardised information will allow better analysis and better insight to system controls and failures.

Policy statement PS16/19, published by the FCA in July 2016, sets out the new reporting requirements. Data will be collected through the FCA electronic reporting system, GABRIEL, and firms will be expected to provide information about the risks they are exposed to and how they are managing these risks.

For example, high risk customers, Politically Exposed Persons (PEPs), Suspicious Activity Reports (SARs) and financial crime staff headcount will all need to be disclosed. In addition evidence of compliance with international sanctions and other fraud risks will also be required. The FCA expect that firms will carry out their own assessments to identify high risk areas and that they will be proactive in declaring anything of particular concern.

To assist firms make the transition to the new reporting requirements the FCA have made a number of concessions. For the first year a firm’s “best endeavours” will be accepted and the submission deadline will be extended by 60 days from 31stDecember 2016. In addition, firms within the same group will be allowed to submit a single report at group level, on the condition that they share the same financial reporting period. Despite these allowances the new reporting requirements have been criticised as onerous on firms. However firms who are currently mitigating and controlling their financial crime risks effectively should already have this information. The main change will be in collating and making it available in a more standardised way. It might also be considered that the introduction of these rules prepares firms in advance of the Fourth Money Laundering Directive, set to become effective in June next year.

The increased efforts of the FCA to guard against financial crime are intended to create a healthier sector; as well as protect firms from liability. As such these changes should be viewed positively. Similar financial crime reporting has already been implemented in New Zealand and Guernsey in the Channel Islands where they are quickly realising improvements.


Some excerpts taken from Compliance Week article: