Updates to the Financial Crime Guide

On 29 November 2024, the Financial Conduct Authority (FCA) published policy statement PS24/17 (Policy Statement) which finalises its updates to its financial crime guide (FCG). The updates align with the FCA’s strategic priority to mitigate financial crime and focus on sanctions, proliferation financing, transaction monitoring, cryptoasset businesses and the Consumer Duty.

Our Head of Economic Crime Compliance, Ben Cooper says... 

“The updates to the FCG emphasise the need for firms to adopt a proactive and technology driven approach to compliance, particularly in areas such as transaction monitoring and sanctions screening.”

The points not to miss...

• Sanctions guidance has been refined: The updates to the FCG provide expanded guidance on sanctions monitoring and reporting and the use of self-assessment tools to evaluate the effectiveness of sanctions systems. Terms such as “sanctions regimes” and “sanctions jurisdictions” are more clearly defined to aid with consistent application across firms. The updates also stress the importance of reporting sanctions related breaches to the Office of Financial Sanctions Implementation (OFSI) and the FCA.
• Proliferation financing (PF) has been integrated into the broader framework for financial crime risk management: Firms must integrate PF risk evaluations into their financial crime risk assessments as required under the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (MLRs).
• Coverage of transaction monitoring has been expanded to reflect advancements in technology: The updated FCG encourages firms to adopt advanced transaction monitoring systems to improve efficiencies in detecting suspicious activity. In particular, the FCG provides guidance on leveraging AI and machine learning.
• The FCG now explicitly refers to, and provides guidance in relation to, cryptoasset businesses: The FCG addresses the risks associated with anonymity-enhancing cryptoassets such as privacy coins as well as the risks associated with mixers and tumblers. Practical examples of how cryptoasset business can manage risks associated with self-hosted wallets and DeFi platforms have also been included. Additionally, cryptoasset businesses must now include sanctions checks.
• Consumer Duty has been integrated into the FCG: Financial crime controls are linked with the broader obligations set out under the Consumer Duty and the FCG reminds firms that they should align their systems with obligations to deliver good customer outcomes. The updates to the FCG also provide recommendations for the integration of the Consumer Duty in relation to, for example, customer support during fraud concerns and communication during onboarding.
• Other general changes and additions: The FCA has also made the following changes (i) updates to references to EU regulations wit UK specific regulations, (ii) introduction of detailed case studies illustrating good and poor practices, and (iii) updates to weblinks to facilitate easier access to supporting materials.