The Financial Conduct Authority (FCA) published its first Annual report on Anti-Money Laundering (AML) on July the 25th. This report sets out the obligations relating to anti-money laundering, and the FCA’s approach to firms’ compliance with these obligations. It also lists the trends and emerging risks in money laundering that the FCA sees in the firms it regulates.
Risks identified by the FCA relate to money service businesses, digital currencies, alternative banking platforms and cybercrime. The application of AML rules by the electronic money institutions is also one of the risks mentioned.
In this respect, the FCA observes that the outsourcing of activities could make an e-money institution vulnerable to money laundering, and that the NCA does not receive a lot of suspicious activity reports from the e-money sector. The report also describes a situation in which an e-money issuer improved the application of AML controls, thereby considerably reducing its vulnerability to money laundering threats.
The FCA announces in the report that it will continue its thematic work in this area, with planned reviews of e-money and new payments methods, as well as the AML controls for high-risk customers in smaller banks. The results of these reviews will be published; they assess how well firms identify and mitigate the money laundering risks they face, and provide guidance on good and poor practice.
The EMA welcomes the FCA’s wish to increase its understanding of the industry through a review of the AML regime in its implementation by e-money firms. Industry will be working closely with the FCA in order to ensure it identifies the issues of relevance and is informed of the range of electronic money products that are being used. There is concern in regulatory and law enforcement circles over the potential of money laundering in this sector as it grows, but so far, industry has been able to track typologies of money laundering and fraud, and has successfully acted to mitigate the risks pose. The EMA believes that this will continue, with greater resources being applied as business grows.
The current planning of the FCA is that the thematic AML review of the e-money sector will commence in the autumn of 2013. It is now likely, however, that the actual reviews will be delayed to the beginning of 2014.