FCA Dear CEO letter for wealth management and stockbroking firms - Are you doing enough?

Matt_Long Posts: 11 QUANTEXA TEAM
edited December 2023 in Specialist User Groups

The UK Financial Conduct Authority has published a ‘Dear CEO’ letter this week to wealth management and stockbroking firms. The letter highlights two areas of concern, prevention of financial crime and implementation of the Consumer Duty.

Specifically related to Financial Crime, it notes that the FCA expects firms to:

  • not knowingly or otherwise engage or facilitate frauds, scams, or money laundering
  • understand financial crime risks by identifying who the clients are, including their expected transaction patterns and corporate structure
  • not carry out tick box compliance exercises or outsource responsibility to third parties
  • ensure there are robust and effective systems and controls to counter financial crime and money laundering in a proportionate and risk-based way
  • ensure SMF 16/17 holders have the required experience, skills, and independence
  • share and report information about wrongdoing to the FCA or relevant law enforcement agencies
  • immediately read and fully implement the Financial Crime Guide: A firm’s guide to countering financial crime risks (FCG) and Financial Crime Thematic Reviews (FCTR), which outline the steps firms must take to defend against financial crime.

The letter concludes by advising that the FCA’s supervision will become more targeted, intrusive and assertive. For example, its new, dedicated financial crime function for consumer investments will focus solely on identifying firms with key fraud, scams or money laundering indicators. The FCA will also increase engagement with firms on non-financial misconduct, with anecdotal evidence supported by recent cases reported to the FCA and public negative press articles.

The FCA highlights that it has already started a major drive with short notice and unannounced visits, particularly for financial crime, and it is increasing the use of its supervisory tools and powers. It plans to use the Consumer Duty to intervene quickly against potential or actual consumers harms, on an individual or multi firm level.

At Quantexa, we are utilising multiple award winning Contextual Decision Intelligence to help global financial institutions comprehensively move beyond “tick-box’ compliance and transform their AML/CFT risk decisioning.

For more information, or if you would like to discuss the underlying regulatory tone, please reach out.