Gaps in Financial Crime Oversight in Corporate Finance Firms
TLT picks out the key points you shouldn't miss...
What’s this about?
On 20 October 2025, the Financial Conduct Authority (FCA) published its survey findings of over 300 Corporate Finance Firms that are not required to submit financial crime data. The review revealed that approximately two-thirds may not be fully compliant with Money Laundering Regulations (MLRs), highlighting significant risk and areas for improvement for combating financial crime.
The FCA’s Report sets out regulatory expectations and reinforcing legal obligations incumbent on firms.
Our Head of Risk and Financial Crime, Ben Cooper says…
“Firms should use the FCA survey findings to review and enhance their financial crime controls, as this remains a key regulatory priority for the FCA. The FCA will expect firms to be able to demonstrate they have made progress in closing the gaps they have identified.”
Alice Gardner, Corporate Partner says…
“With the ongoing wave of consolidation in the professional services and corporate finance sectors, driven largely by private equity investment, these findings will be very relevant to the M&A due diligence process. Regulatory compliance underpins value and is always a key area of focus.”
Good practice identified by the FCA
- Senior management reporting: 97% of firms highlighted that they regularly report to senior management on financial crime matters.
- Risk registers and management information: Many firms conduct regular assessment and maintain documentation of financial crime risks. These are captured in live risk registers with measures to mitigate them. Detailed management information is also used to monitor and enhance financial crime controls.
- Customer risk assessments: Firms use of customer risk assessment forms to document the financial crime risks posed by clients.
Areas for improvement
- Business wide risk assessment: Under the MLRs, firms must have documented business-wide risk assessment to identify and assess the risk of money laundering and terrorist financing The FCA’s survey found that 11% of firms and 16% of Principals had no documented business-wide risk assessment.
- Customer risk assessments: The MLRs require firms to document the financial crime risks posed by clients. The FCA noted that 27% of firms and 35% of Principals did not use customer risk assessment forms to document the financial crime risk posed by their clients.
- Weakness in Appointed Representatives (ARs) risk management: 29% of Principals did not conduct financial crime risk assessments of their ARs. Additionally, 19% did not evaluate the effectiveness of their oversight and controls in managing AR-related financial crime risks.
Good practice identified by the FCA
- Client relationships: Firms with strong client relationships often have a good understanding of their clients’ activities and risks which is supplemented by up-to-date written records of due diligence, including customer screening and ongoing monitoring of source of funds.
Areas for improvement
- Document retention: The MLRs require firms to maintain records of CDD and EDD. The FCA survey found 10% of firms did not retain documented evidence of CDD
- Verification: Some ARs did not verify the source of investors funds or conduct EDD on high-risk clients.
The FCA requires Principal to ensure that they are effectively monitoring and overseeing their ARs and so expects following in place
- Policies: Principals having in place specific policies the procedures to oversee and effectively manage financial crime risks associated within their ARs
- Risk assessment: Ensuring that regular financial crime risk assessment of their ARs is undertaken
- Oversight and monitoring: Regular testing of effective management of financial crime risks and compliance with financial crime legalisation by their ARs through audits and management information
At a glance...
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