The FCA has published the results of its review of financial crime controls in the asset management industry. It focused on inherent risks and control risks. Overall, it had good engagement from the sector and found follow up interviews to be helpful.
- some business models carry inherent risks, especially where active in private markets:
- customers with complex ownership structures;
- high risk customers; and
- international funds flows;
- some firms may underestimate these inherent risks, leading to an informal control approach
- some firms had no, or an incomplete, BWRA;
- not all firms had formal customer risk assessments and had not implemented effective controls for identifying owners in complex chains;
- around 40% of firms outsource CDD and EDD checks and several of these could not explain how the processes worked or that they were being overseen;
- most firms had good ongoing monitoring programmes in place, but some did not formally monitor transactions or quality of internal SARs;
- a few firms had weaknesses in their PEP, sanctions and adverse media screening;
- over half of the MLROs in the surveyed firms worked part time or had shared responsibilities, including several larger firms; and
- levels of training varied.
The FCA reminds firms to keep their financial crime systems and controls compliant and asks them to look at its findings as appropriate to their own business model.