Financial crime regulatory developments: May update

JMLSG has received HM Treasury Ministerial approval of its guidance material as published in September 2024 (Part II Sector 18), October 2023 (Part I Paras 5.3.129A-C) and July 2023 (Part I Para 5.3.89).

Impact: Firms should ensure that their internal controls have been updated to consider the guidance material updates.

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This document articulates the PSR's Annual Plan and Budget for 2025-6. Key takeaways:

• Transition to FCA: The PSR is preparing for a future consolidation with the FCA, although it retains its full powers and remit for now.
• It plans to build on the world’s first reimbursement requirement and expanding Confirmation of Payee (CoP) to combat fraud.
• The Treasury is consulting on the full integration of the PSR into the FCA, with legislative changes expected.
• Its total budget is £28m (same as 2024/5). This includes £21.5m staff costs and £3.9 in FCA recharges.

Impact: Firms should not expect immediate changes to the PSR's supervision approach, with the consolidation of the PSR into the FCA expected to be a gradual, measured process. The PSR's budget has been maintained from the previous financial year, indicating that resourcing appears to remain consistent.

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This publication by the PSR articulates the impact of the APP fraud reimbursement requirement since it was implemented on 7th October 2024.

Key findings:

• Reimbursement rates for victims are high, and vulnerable customers are better protected.
• There were concerns that the amount of APP scam claims would increase with the new requirement, however, there has been limited evidence of this.
• Another concern related to customers not being cautious enough when this requirement was implemented. However, data shows that only 2% of total claims were rejected for this reason.
• Certain feedback has suggested that information shared between sending and receiving firms is often limited and improvements are needed to promote effective collaboration.

Impact: Firms should expect an independent review in October 2025, assessing the effectiveness of this policy, a year since it initially came into force.

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The FCA are seeking views on their approach to regulating cryptoasset trading platforms and other related parties and activities.

As part of its efforts to create a safe, competitive and sustainable cryptoasset sector, the FCA are seeking views on how it regulates this sector.

Feedback is to be submitted by 13 June 2025.

Impact: Firms operating in the cryptoasset sector should use this consultation as an opportunity to provide feedback on the FCA's supervision activity.

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On 11 April 2025, OFSI imposed a monetary penalty of £5,000 on the UK-registered company Svarog Shipping & Trading Company Limited (“Svarog”). 

Svarog failed to respond within the required timeframe to a statutory Request for Information (RFI) made by OFSI, and failed to provide a reasonable excuse.

OFSI's key compliance tips for those in industry:

1. Firms should recognise the seriousness of failing to respond promptly to RFIs.
2. Engage proactively and candidly with OFSI when it comes to RFIs.
3. Have effective communication and monitoring systems in place.
4. Consider other compliance and reporting obligations.

Impact: Firms should consider whether their procedures and processes in relation to responding to external requests from regulators and law enforcement authorities are effective.

The timeliness of handling law enforcement requests should be factored into management information performance metrics.

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This is a document published by OFSI, providing guidance for high value dealers and art market participants.

Key takeaways:

• These sectors are particularly vulnerable to the use of intermediaries or shell companies to obscure ownership, price manipulation (due to subjective valuations), and the use of digital assets to circumvent restrictions.
• From 14th May 2025, relevant firms must meet mandatory reporting obligations and report any dealings with Designated Persons listed on UK sanctions lists.
• Non-compliance can lead to civil penalties and criminal prosecution.

Impact: High value dealers and art market participants should ensure that preparations are made ahead of the mandatory reporting requirement coming into force from 14th May 2025.

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This cross-government review outlines the UK Government's key efforts to improve its sanctions regime, focusing on compliance, deterrence and enforcement powers.

Enforcement has been improved through monetary penalties (£465,000 fine in March 2025) and criminal penalties, such as the first convictions related to breaches of Russia sanctions.

The Foreign, Commonwealth and Development Office (FCDO) recommends better information sharing across government and reducing the administrative burden on businesses of complying with sanctions legislation and guidance.

Impact: In light of increased enforcement action and improved information sharing arrangements, firms should consider whether their sanctions controls would withstand regulatory scrutiny, such as controls related to screening processes, policies/procedures governance, management information, and regulatory reporting.

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UK Finance's Annual Fraud Report for 2025. Key takeaways:

• Total fraud losses in 2024 amounted to £1.17 billion, similar to 2023 levels.
• Banks prevented an additional £1.45 billion in unauthorised fraud through the controls in place.
• Fraudsters are increasingly using social engineering to trick victims into revealing one-time passcodes, enabling them to authenticate fraudulent transactions or register stolen cards in digital wallets.
• The financial sector continues to invest in fraud prevention and calls for greater collaboration with tech and telecom sectors to combat fraud at its source.

Impact: Firms should consider whether they have controls in place to manage the risk of typologies such as fraud related to one-time passcodes and remote purchase fraud.

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This joint publication from ACAMS and CIFAS explores how firms should tackle the growing threat from within: managing and responding to employees committing fraud, embezzlement, data theft, insider trading, and even corporate sabotage. Key takeaways:

• Consistent with figures for 2023, the leading case types were “dishonest action by staff” (47%) followed by “false employment application (unsuccessful),” accounting for 29%.
• The Ponemon Institute suggests that the financial sector bears the greatest cost, reporting an average cost of $701,500 linked to cases of criminal or malicious insiders.
• The critical importance of cohesive collaboration among internal departments to mitigate insider threats is paramount. Silos between AML, fraud detection, cybersecurity, and policy functions create vulnerabilities that malicious insiders can exploit.
• Robust monitoring systems and proactive threat detection tools are essential components in identifying insider threats. Internal security audits, risk assessments, and logs of suspicious or negligent user activity can uncover vulnerabilities, particularly among remote workers with elevated levels of system access.

Impact: Firms should review the controls applied to internal fraud, including those related to bribery, corruption and collusion. In light of this publication, monitoring processes, internal security audits and risk assessments should be reviewed to ensure they remain effective.

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Despite recent transparency reforms in the UK, trusts remain a major loophole in property ownership transparency, allowing wealthy individuals—including those linked to corruption and sanctions—to hide their identities. Transparency International UK’s new analysis reveals that over £2.5 billion worth of property in England and Wales is owned through complex trust structures, often involving suspicious wealth. Of these, 138 properties worth £2.1 billion were acquired in the last 15 years.

Whilst offshore companies are now required to disclose their beneficial owners, trusts are not subject to the same level of scrutiny, making them the “final frontier” in the fight against dirty money in UK real estate. The report calls for urgent reforms to close this gap and ensure that trust-based ownership is no longer a shield for secrecy and corruption.

Impact: Firms with customers existing as trusts should review their current control environment to determine whether enough scrutiny is placed on complex ownership structures that may obfuscate the true ownership and source of wealth/funds of these customers.

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