FCA warns of Annex I firm risks

The FCA has warned regulated firms about the need to do proper checks when dealing with Annex I firms such as unregulated lenders, safe custody providers, money brokers and financial leasing companies. It reminds firms that Annex I firms are not authorised, and that the FCA’s powers are limited to looking at how these firms comply with AML requirements. So authorised firms dealing with them must conduct appropriate due diligence, including on the registration status and the risks the relevant entity presents.

It notes recent concerns, including that consumers have been encouraged in some cases to set up limited companies such they they can access unregulated lending – giving the example of unregulated bridging finance. It says consumers need to understand that they will not have access to the FOS when things go wrong if they deal with Annex I firms.

The FCA has separately announced an enforcement investigation into Market Financial Solutions Limited, an Annex I firm that entered administration at the end of February.