UK: FCA Thematic Review - AML And ABC Systems And Controls: Asset Management And Platform Firms

Last Updated: 11 November 2013
Article by Deloitte Financial Services Group

Most Read Contributor in UK, August 2017

The latest Financial Conduct Authority (FCA) thematic review, published on 31 October, provides an assessment of the Anti-Money Laundering (AML) and Anti-Bribery and Corruption (ABC) systems and controls across asset management and platform firms. Deloitte was engaged to assist the FCA with this review, including assessing the arrangements in place at the sample of 22 firms. This was the first time these areas have been looked at thematically in the sector.

While the report notes that some good practice was observed, it highlights many areas where there is more work to do. This includes shortfalls in controls that, if effective, help to protect firms from the money laundering and bribery corruption threats faced - for example, failing to properly identify and assess customer risks. This can weaken not only the initial Customer Due Diligence (CDD), but also the on-going monitoring performed throughout the customer lifecycle.

Weaknesses were also noted in the way most firms acted on the output of organisational money laundering and bribery and corruption risk assessments, the verification of source of wealth and source of funds for higher risk customers, and, on the basis of the review's findings as a whole, the effectiveness of training.

Taking a step back, there was commonality in the shortfalls not only across the firms included in this review, but with those reported in prior thematic reviews and even previous cases of regulatory intervention. The report therefore presents a timely opportunity for firms to reflect on their own arrangements and to take action to avoid the recognised pitfalls.

So what actions can firms take?

The starting point is an objective health check of existing AML and ABC arrangements. This exercise will provide the output necessary to respond to any areas of weakness identified, efficiently and effectively. It is important that these actions are taken, and that firms defend themselves against the threats faced.

This exercise also provides an opportunity to present a structured and measurable report on the adequacy of AML and ABC arrangements in place to Senior Management, informed by up-to-date examples of industry good practice. In doing so, this would also respond to one key finding of the report, whereby some firms could not provide evidence to demonstrate effective senior management oversight and challenge.

Deloitte has seen first-hand the challenges faced across the sector and the wider industry in meeting AML and ABC legal and regulatory requirements. Although the scale of these challenges is confirmed by the findings of the report, firms are still expected to maintain a robust suite of systems and controls. These expectations are consistently emphasised by the FCA, and firms able to meet these can help to make weaknesses in the industry less common.

The full report is available on the FCA website. 

For further information or if you have any queries regarding the report, please contact: 

Tom Lewthwaite
Tom is a Partner in Deloitte's Risk and Regulation practice with responsibility for the related financial crime and regulatory investigations services, and was the Engagement Partner for the work undertaken by Deloitte to assist the FCA with completion of this thematic review. For five years Tom was responsible for compliance of the UK firm with the FSA (now FCA) requirements including oversight of the implementation and monitoring of the associated AML and ABC requirements. 

Julian Colborne-Baber
Julian, a Partner in Deloitte's Forensic practice, specialises in forensic advisory and conducting financial crime investigations in the financial services sector. Julian has led and advised on a number of cases involving corruption, money laundering, sanctions, fraud and accounting irregularities. Julian has acted as a Skilled Person for the FCA and is experienced in dealing with retained counsel, client management and regulatory authorities.

James Dillon
Dr James Dillon is a Partner in Deloitte's Risk and Regulation practice with responsibility for the related financial crime and regulatory investigations services. He is the asset management sector lead within Deloitte's financial crime risk management group. James is a senior advisor to financial institutions concerning measures implemented to defend against financial crime and comply with associated regulations. 

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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