The FCA has carried out a review on the systems and controls against money laundering that wholesale brokers have in place to prevent money laundering through the capital markets and has concluded that they could do better. It says firms have made progress since its last major review of the sector in 2019, but noted room for improvement where:
- firms tend to underestimate the money laundering risks they are exposed to
- firms rely on others in the transaction chain carrying out CDD on customers
- information sharing could be better and
- firms are not aware of the “money laundering through the markets” SAR glossary code
It also found that firms struggle with transaction monitoring.
The FCA has taken the opportunity to renew its risk assessment of MLTM which it originally did in 2019, and notes that the 2020 NRA highlights that capital markets continue to offer criminals a route to move and disguise the audit trail of money through complex transactions.
It now reminds firms that they should:
- consider and appropriately document the MLTM risks posed to and by them, and ensure this is reflected in their business-wide risk assessment and systems and controls;
- consider how best to use tailored transaction monitoring as part of its process;
- ensure they have firm- and role-specific training and awareness in place;
- ensure relevant staff are aware of the MLTM SARs glossary code and are using it appropriately; and
- consider how ECCTA allows them best to share information to reduce MLTM risk.
The report follows the usual practice of giving examples of good and poor practice and some practical case studies.