I don’t know about you, but I’m still calling our new financial watchdog “the FSCA”. I’ve grown so used to the S that it’s taking a while to learn the C. Moreover, we’re still in the handover phase, where the FCA is concluding work started by the FSA. For instance, they have chosen to release the first FCA “Anti-money laundering annual report” now, rather than waiting until their first birthday on 1 April 2014. But we take what we’re given, and are very grateful.
So let’s have a look. It’s a slim document, a mere eighteen pages from cover to cover, and some of it is unremarkable regulator-speak (“We will increase the transparency of our work where appropriate… We are also committed to carrying out our responsibilities using a risk-based and proportionate approach”, etc.). But there are useful bits too. For those of you (perhaps non-UK people) wrestling with our fragmented supervisory landscape, there is a handy summary of who does what: “The FCA is responsible for ensuring that most authorised firms and all e-money institutions comply with the Money Laundering Regulations 2007, with the exception of the likes of those undertaking purely general insurance business, or mortgage or general insurance intermediary activity, which are not subject to the Regulations. We are also responsible for what are known as ‘Annex I Financial Institutions’ such as financial leasing companies, safe custody services and money broking. These are not authorised activities but are subject to standalone anti-money laundering supervision by the FCA. The Office of Fair Trading is responsible for regulating consumer credit institutions until 1 April 2014 [when it will switch to the FCA]. HM Revenue and Customs are the AML supervisors of money service businesses (MSBs), including money transmitters and currency exchangers (where these activities are not carried out by an FCA-authorised firm).” Pay attention at the back: there will be a quiz at the end of term.
For me, however, the real interest of the report comes at the end, with the chapter on “Current trends and emerging risks”. Some highlights:
- E-money issuers: “[Many] are new market entrants and are not accustomed to the AML regulatory and legal framework. In addition, their business model, where they ‘segment’ (i.e. outsource) provision of the service to a third party makes it vulnerable to money laundering [because] the e-money issuer has little or no oversight of the end to end use of the service, yet has legal responsibility for AML controls over it.“
- Cybercrime: “According to Government data, the financial services sector, which is regarded as an integral part of the national infrastructure, suffers the fifth highest number of cyber-attacks against its computer systems.“
Alternative banking platforms (or payment platforms, or virtual banks): “These systems
provide the functionality of a bank but sit outside the
Recent cases suggest that the firms that offer these services are incorporated, and operating,
in jurisdictions that do not have robust anti-money laundering oversight.”
In short, well worth a read – it won’t take you more than a two-Jaffa-Cake break.