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29 April 2015

FCA Guidance

As discussed, the FCA have now published the revisions to their Firms Guidance on Financial Crime.  In particular the regulator amended Chapter 2 of the Guidance on Financial Crime Systems & Controls on Risk Assessments, as outlined below, as well as Management Information as well as revising Chapter 3 on Money Lauding & Terrorist Financing.

Chapter 2 Guidance Amendments:

Financial Crime Risk Assessments:

The Regulator advises that if a firm is to apply proportionate and effective systems and controls, then having a thorough understanding of the financial crime risks that it is exposed to is vital.

Therefore a firm should identify and assess those risks to which it is exposed to that they can then target their financial crime resources on areas of greatest risk. The firm should identify and assess risks such as:

• The products and services that it offers
• The jurisdictions it operates in
• The types of customer it attracts
• The complexity and volume of transactions
• The distribution channels it uses to service its customers

The regulator informs that business-wide risk assessments should therefore:

• Be proportionate to the nature, scale and complexity of the firm’s activities;
• Draw upon a wide range of relevant information, as invariably it is not sufficient to consider just one source
• Be comprehensive and consider a wide range of factors – again as considering only one factor is invariably insufficient.

Firms, having considered their business-wide risk assessments, should build upon these to determine the level of risk associated with individual relationships. This should:

• Enable them to take a holistic view of the risks associated with the relationship, considering all relevant risk factors; and
• Enable them to apply to apply the appropriate level of due diligence to manage identified risks.

Whilst assessment of the risks associated with individual relationships can inform, they are not a substitute for business-wide risk assessments, as such firms should review both business-wide and individual risk assessments regularly to make sure they remain current and appropriate.

Further Reading:

• The FCA Financial Crime Guidance Amendments
• Chapter 2 Systems & Controls: Management Information
• Chapter 2 Systems & Controls: Financial Crime Risk Assessments.
• Chapter 3 Money Laundering & Terrorist Financing: Source of Funds & Source of Wealth
• Chapter 3 Money Laundering & Terrorist Financing: Enhanced Due Diligence
• Preventing Financial Crime: Information & Links

Financial Crime Systems & Controls: Risk Assessments