The FCA’s 2017-18 Business Plan

The FCA’s 2017-18 Business Plan

Outlining the FCA’s priorities relating to Financial Crime and Anti-Money Laundering

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The FCA’s 2017-18 Business Plan

The Financial Conduct Authority’s (FCA) 2017-18 Business Plan identifies six cross-sector priorities, of which financial crime and anti-money laundering (AML) is one. Many of the outcomes the FCA seeks to achieve through the use of its supervisory and enforcement powers are largely consistent with its 2016-17 business plan.

Overview of the plan

Reflecting on the report, the FCA:
  • Is keen to ensure that the unintended consequences of AML regulation are minimised. It has stressed that firms should seek to concentrate resource proportionate to levels of identified risk, rather than apply unnecessary procedures and scrutiny to areas with lower or minimal money laundering risk (e.g. Conducing regulator financial crime assessments to ensure they are current and updated will better equip firms to place appropriate levels of monitoring and review to their higher areas of risk).

  • Expects that firms may seek to reduce spend and efforts on AML systems, processes and controls as a result of higher costs and falling profits. The FCA expects that firms will consider new and innovative technologies to support automated monitoring in this area. This could include, for example, robotics and cognitive capabilities to reduce false positives and manual processing.

  • Is working on drafting guidance - with the European Supervisory Authority (ESA) - to support the 4th Money Laundering Directive, which is required to take place by June 2017. Industry guidance has also been drafted by the Joint Money Laundering Steering Group and is reflective of text in the ESA Consultation published in October 2015. Firms should consider all relevant guidance when updating their financial crime frameworks.

  • Will continue its efforts on de-risking to achieve an outcome where people and entire sectors are not unfairly or unreasonably excluded from using financial services due to AML processes.

  • Will continue to encourage whistleblowers to come forward and provide actionable intelligence for the FCA to exercise its supervisory and enforcement powers.

  • Is continuing its role to raise awareness of known scams and to increase efforts to protect consumers from fraud. It has been working with other members of The Joint Money Laundering Intelligence Taskforce to enhance this awareness across the industry and law enforcement. Early indications across the industry has praised this initiative of sharing data.

What does this mean for you?

Risk Assessments

As a starting point and to ensure an effective risk-based approach, the FCA would expect firms to regularly review and update financial crime and AML risk assessments to ensure that areas of higher risk and lower risk are identified. The FCA has been keen to stress that it expects firms to apply proportionate levels of resource and controls to areas of higher risk rather than maintain a ‘one-size fits all’ approach. This may involve considering how technology can automate labour-intensive and manual processes, particularly in the areas of customer on-boarding processes, sanctions and transaction monitoring.
 

Senior Managers Regime

Throughout the Business Plan, the FCA has mentioned the importance on an organisation’s culture, governance and adherence to the Senior Managers Regime (SMR). Consequently, those holding Senior Manager roles (or Controlled Function roles where SMR has yet to take affect) should ensure they receive adequate management information (MI) to exercise an appropriate level of oversight and control over matters relating to financial crime and AML. Firms may wish to align this MI against the new requirement for Financial Crime Data Returns.
 

Whistleblowing rules

The FCA released new whistleblowing rules in 2015. Given the recent attention in this area, firms are well-advised to consider formally reviewing their whistleblowing policies and procedures and consider providing specific firm-wide training in this area.
 

Consumer protection against fraud and scams

The FCA has re-emphasised the importance of protecting consumers against fraud and scams. Release of pension funds under the pension reforms has attached attention from fraudsters. Firms in the pensions business may wish to critically assess the tools used to undertake due diligence where requests are received from consumers to liberate their pensions and transfer the proceeds to investments offering unusually high returns. Due diligence technology is more widely available than ever before and can provide firms with assistance to provide an appropriate degree of protection to customers.
 

De-risking

Lastly, firms should continue to be mindful of the FCA’s stance on de-risking and be conscious of any measures that could be perceived as de-risking and which could be significantly detrimental to consumers. Appropriately recording your rationale for exiting business/relationships, together with ensuring a fair approach and that your risk appetite aligns with your business strategy, will be key.

 

Read the Business Plan in full.

 

For further details or questions please contact Rob Cutler, Partner and Head of Financial Services Forensic at KPMG in the UK.

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