Financial crime regulatory developments: July update

Summary: This report outlines emerging terrorist financing threats. It covers risks relating to hawala banking, shell companies, virtual assets and online payment platforms.

Impact: Emerging terrorist financing threats should be appropriately considered as part of firms' risk assessments.

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Key takeaways from the FCA's finalised guidance:

• Non-executive board members of UK civil service departments are not to be classified as PEPs. 
• Flexibility permitted in the approval of PEP relationships and those considered to be 'senior management'.
• Guidance on how the FCA expects MLROs to have oversight of PEP controls. 
• Additional support for both UK and foreign groups on how to manage compliance with both group standards and local UK regulations. 
• Tweaks to some of the PEP role definitions. 

Impact: Firms should update PEP/EDD policies and procedures to ensure that this guidance is appropriately considered. Staff should be trained on any new requirements.

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Summary: The FCA has fined a UK-based digital bank £21.1m for "failures" in its financial crime controls. It is outlined that the bank's financial crime controls did not keep pace with its rapid growth.

The final notice draws reference to a failure to appropriately assess the nature and purpose of its customer relationships, review adverse media hits in the absence of other risk factors, and verify beneficial owners and persons of significant control for business customers.

Impact: Firms undergoing significant growth should ensure this is matched by an effective financial crime control environment. Controls should focus on the data collected at onboarding, ongoing monitoring purposes, and adverse media/beneficial ownership checks.

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Summary: The FCA Annual Report 2024/25 highlights significant progress in tackling financial crime. The regulator issued over 2,200 alerts about unauthorised firms and individuals, disrupted multiple scams, and strengthened its data capabilities to detect and prevent fraud more effectively. It also enhanced collaboration with law enforcement and international partners to combat money laundering and other illicit financial activities.

Impact: Firms should monitor the FCA's alerts about unauthorised firms and take note of its key priorities.

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Summary: The FCA has fined the UK corporate and retail divisions a combined £42 million for failures in financial crime risk management. The incident concerns two firms, a financial institution and precious metals dealership.

Key takeaways:

• Financial institution: the bank opened a client money account for the financial institution without verifying its regulatory permissions. As a result, £34 million was deposited into the account, increasing the risk of money laundering or misappropriation.
• Precious metals dealership: the bank failed to properly assess and monitor the money laundering risks associated with the business. The firm received £46.8 million from Fowler Oldfield, a known money laundering operation.

Impact: Firms should ensure that intended controls actually work in practice and that law enforcement warnings are appropriately considered.

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Summary: This is a statement from the FCA outlining its financial crime expectations for authorised firms. The document outlines how firms should approach organisational structures, policies and procedures, recruitment and remuneration.

Impact: Firms should consider this guidance as part of risk assessments and overall approach to financial crime risk management.

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Summary: This document outlines the UK government's response to feedback received during its consultation on reforming the Money Laundering Regulations. 

Key areas of proposed reform include making CDD requirements more proportionate and effective, providing clearer guidance on which entities fall under the scope of the MLRs, and simplifying registration requirements for trusts.

Impact: Firms should expect reforms to the Money Laundering Regulations based on the key focus areas outlined within the response document.

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Summary: This red alert notice is designed to help firms to identify and report suspicious activity linked to Russian oil trading networks that are evading UK sanctions. 

It is outlined that Russian oil revenues account for around 30% of its federal budget and that a complex network of companies is being used to bypass sanctions and access Western financial services.

Impact: It is recommended that firms continue to monitor sanctions evasion typologies and promptly report breaches to OFSI.

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Summary: The NCA/FCA have jointly published nine strategic priorities to help guide the prevention of economic crime. These are as follows:

1. Cash-based money laundering
2. Exploitation of money mules
3. Fraud linked to overseas jurisdictions
4. Sanctions evasion, especially related to Russia
5. Use of professional enablers (e.g., lawyers, accountants) to facilitate financial crime
6. Terrorist financing
7. Organised immigration crime
8. Drug and firearms trafficking
9. Human trafficking

Impact: Firms should review existing controls and assess whether the risks identified within this publication are managed appropriately.

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Summary: The report outlines the NECC’s achievements in tackling economic crime across the UK during the 2024–25 period.

Key takeaways:

• It is outlined that money laundering continues to underpin most organised crime, especially with the increasing use of cryptocurrencies and new technologies that can be used to move the proceeds of crime. 
• A significant data-sharing initiative was launched between the NCA and seven UK banks. 
• Multiple national operations took place, aimed at tackling fraud and money laundering.
• Fraud now accounts for 43% of all crime in the UK.

Impact: Firms should continue to ensure that the data provided to regulators and law enforcement is accurate, complete and up-to-date to support investigations and data sharing processes.

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Summary: The PSR's Annual Report 2024/5 outlines a year of progress in protecting UK payment systems. Key achievements include near-universal adoption of Confirmation of Payee for Faster Payments and the implementation of world-leading reforms to tackle APP fraud, aimed at protecting victims and incentivising firms to prevent fraud.

Impact: Fraud prevention controls should continue to be prioritised, especially in relation to APP fraud, which is now subject to mandatory reimbursement rules.

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Summary:HMT has issued the 2025 UK National Risk Assessment of money laundering and terrorist financing.

Key takeaways:

• Cyptoasset firms upgraded from Medium to High for money laundering.
• Payments firms upgraded from Medium to High for both money laundering and terrorist financing.
• The UK risk of money laundering remains high, with criminals using cash intensive businesses and complex ownership structures to facilitate economic crime.

Impact: Business-wide risk assessments should be updated to ensure that the key findings from the UK National Risk Assessment have been considered as part of firms' assessment of relevant risks and controls.

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Summary:POCA has been updated to raise the DAML threshold from £1,000 to £3,000. The threshold increase reflects inflation and aims to reduce unnecessary authorised disclosures for low-value transactions.

Impact: SAR procedures should be updated and staff should be made aware of how this will affect the identification and reporting of suspicious activity.

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Summary:Key threats include using cryptoassets to circumvent asset freezes, a lack of transparency in ownership/transaction flows, and decentralised platforms and increased exposure through peer-to-peer exchanges.

Impact: Cryptoasset firms should use this assessment to help design controls related to sanctions compliance.

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Summary:The guidance aims to tackle people smuggling and human trafficking, as well as hold individuals and entities involved to account.

Impact: Firms should update internal controls to  cover new designations under this regime.

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Summary:OFSI is seeking feedback on proposed changes to civil enforcement for financial sanctions.

The key changes include updated case assessment guidance, a new settlement scheme for those subject to monetary penalties and changes to the maximum penalties that can be imposed by OFSI.

The consultation is open until 13th October 2025.

Impact: Firms should use the consultation period to provide their input on the proposed changes.

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Summary:In co-ordination with the EU, the UK has lowered the Crude Oil Price Cap from $60 to $47.60 per barrel to further restrict Russia's ability to fund the war in Ukraine.

Impact: Firms should continue to monitor sanctions and economic restrictions placed on Russia.

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Summary:This statement re-affirms the Wolfsberg Group's commitment to applying a risk-based approach to financial crime prevention.

The guidance articulates that controls should be proportionate to firms' size, scale and risk appetite. It also emphasises the need to focus on higher risk customers/activities, as well as on effective outcomes.

Impact: The core principles articulated within this document should be used to guide firms' application of a risk-based approach.

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