Upping The Fight Against Financial Crime

“A firm must establish, implement and maintain adequate policies and procedures sufficient to ensure compliance of the firm, including its managers, employees and appointed representatives (or, where applicable, tied agents) with its obligations under the regulatory system and for countering the risk that the firm might be used to further financial crime.”

FCA Handbook, SYSC 6.1.1

Last year the FCA added financial crime as a key focus, replacing rapid house price growth in its list of top risks. The FCA 2016/17 business plan reinforces financial crime as a priority.

Money laundering is the most problematic of financial crimes as it enables other criminal activity such as drug dealing, people and firearms trafficking, terrorism, counterfeiting and cyber-crime. It is thought money laundering costs the UK more than £24 billion a year. In addition to these costs, money laundering threatens financial market stability. Effective anti-money laundering (AML) is critical to protect market integrity and maintain stable economic conditions.

The National Crime Agency (NCA) estimates that the amount laundered through the UK financial services companies each year is in the hundreds of billions. This puts the sector on front line in the fight against financial crime.

AML compliance is a serious responsibility for financial services companies, in particular the individuals working in compliance roles who can be personally liable for breaches. As well as carrying greater levels of personal risk, many Financial Crime Risk professionals have genuine concerns about the ability of their firms to continue to be effective in the future. Keeping ahead of regulation and technology change are major challenges.

Digital technology is the single biggest concern. Virtual currencies, peer-to-peer financial solutions and mobile payments present new opportunities for criminals to exploit. The rate of technology change also presents a challenge in keeping up with these new areas of risk.

In a recent survey by the BBA, 61% of respondents stated that the current regulatory measures are “overly stringent”. Building the required measures to meet current regulation adds significant operational cost. Firms may end up having to compromise other areas in diverting resources to financial crime.

To support the fight against financial crime, the FCA is trying to foster greater collaboration with firms, law enforcement and other agencies. Whilst forums such as the Joint Money Laundering Intelligence Taskforce indicate progress, efficiencies will only come through doing more.