On 3 October 2018, the FCA published the findings of their long-awaited AML Thematic Review into the e-money sector.
Brief overview of the report:
- The FCA visited 13 e-money firms representative of the sector and for each conducted a pre-visit document review followed by an on-site review including interviews, systems walk-throughs and file reviews.
- The thematic report does not identify (like previous reports have done) an overall ML/TF risk associated with the e-money sector, such as ‘medium’ or ‘low’. Instead, it describes the state of compliance and gives examples of good and poor practice.
- Overall, the FCA encountered very few instances of poor practice and many instances of full compliance with the relevant obligations. In our view this would support a finding of low risk, although this conclusion is not explicitly drawn by FCA.
- The executive summary states that firms generally have a positive culture, good understanding of their obligations and a low risk appetite with few high-risk customers. This reinforces our often stated view that the e-money sector as a whole is of low residual risk
- Areas in which poor practice was detected (usually as an exception from the norm) relate to a lack of recording of steps taken, discrepancies between generic policies and actual practice and an incomplete implementation of controls across the firm.
- Perhaps the most important area of poor practice was risk management, where the FCA expected to see all customers covered by a risk assessment, which was not always the case.
- In summary, this appears to us to be a very positive report that credits e-money firms with a good compliance culture and should help dispel the image of the e-money sector as a sector of high-risk business.
What should members of EMA do in response?
- As always with FCA thematic reviews, we encourage firms to read the review in full and consider how all the points of good and poor practice highlighted by FCA apply to their own business environment.
- Firms should consider in particular the areas of poor practice identified: We especially draw firms attention to the FCA’s comments on improving risk assessment as this is fundamental to an effective risk-based approach.
- It is also important that firms consider how they perform against the good practice highlighted in the review.
- We believe that using the FCA’s helpful review in this way will contribute to increasing confidence in the effectiveness of the industry’s approach to AML/CFT.
We think the industry should, overall, be gratified with the findings in this review, but, as the FCA rightly reminds us, there is no room for complacency and we must use the review to continue to improve our AML/CFT efforts.
The full report can be accessed from the FCA website