Financial crime regulatory developments: October update

Summary: In the FATF October 2025 Plenary, the term “AI risk alerts” refers to warnings about the misuse of artificial intelligence (AI) in financial crime. FATF highlighted that criminals are increasingly exploiting generative AI, AI agents, and deepfake technologies to enable fraud, scale illicit finance, and undermine trust in financial systems.

Impact: FATF October 2025 Plenary outcomes are a significant strengthening of global financial crime defences. Key developments include:

• For Firms: AML/CTF frameworks must adapt to detect and mitigate AI‑enabled fraud, deepfake misuse, and synthetic identity risks.
• For MLROs & Compliance Teams: Need to incorporate AI misuse scenarios into risk assessments, monitoring, and suspicious activity reporting.
• For Regulators: Supervisors will expect firms to demonstrate awareness of AI‑related risks and evidence controls to address them.
• For the Financial System: Raising the bar on resilience, requiring proactive monitoring, staff training, and technology safeguards to counter AI‑driven threats.

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Summary: The FCA supports tokenization to modernize financial markets and improve settlement efficiency. It encourages industry collaboration to explore how distributed ledger technology (DLT) can enhance transparency and reduce costs. This initiative aligns with the UK’s broader strategy to foster innovation while maintaining regulatory standards.

Impact: More efficient, transparent, and innovative financial market ecosystem powered by secure digital asset infrastructure.

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Summary: The FCA conducted a multi-firm review to assess how financial institutions prevent, detect, and respond to romance fraud. It highlights good practices and areas needing improvement in victim support and fraud risk management.

Impact: Stronger industry focus on victim protection, improved fraud detection practices, and clearer expectations for financial institutions to proactively support vulnerable customers.

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Summary: The FCA’s review of corporate finance firms found widespread weaknesses in financial crime controls, especially around risk assessments and customer due diligence. It also highlighted examples of good practice to guide improvements across the sector.

Impact: Regulatory pressure on corporate finance firms to strengthen financial crime controls, particularly around risk assessments, customer due diligence, and oversight of appointed representatives, driving better compliance and reducing exposure to financial crime.

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Summary: The FCA’s survey found that many corporate finance firms lack adequate financial crime oversight, with gaps in risk assessments, due diligence, and monitoring of appointed representatives. It urges firms to strengthen controls and comply with Money Laundering Regulations

Impact: Increased regulatory scrutiny and pressure on corporate finance firms to strengthen financial crime oversight—especially in risk assessments, due diligence, and governance—helping reduce exposure to money laundering and improve sector-wide compliance.

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Summary: The FCA banned and fined Neil Sedgwick Dwane for insider dealing, after he used confidential information to profit from trading ITM Power Plc shares. This enforcement action reinforces the FCA’s commitment to maintaining market integrity and deterring unlawful financial conduct.

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Summary: The UK Government has decided to reform the anti-money laundering and counter-terrorism financing (AML/CTF) supervisory regime to improve effectiveness and coordination. The FCA supports this move and will work closely with the new regulatory body to ensure a smooth transition and continued protection against financial crime.

Impact: Streamlined and effective regulatory framework. It aims to reduce fragmentation, improve coordination among supervisory bodies, and enhance the UK’s ability to detect and prevent financial crime—strengthening trust in the financial system.

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Summary: This article tracks the UK government's transition to a unified sanctions list, effective from 28 January 2026.
The purpose of the article is to inform stakeholders that the UK government will transition to a single consolidated list of sanctions designations effective 28 January 2026, streamlining how sanctions targets are published and managed across all regimes.

Impact: Streamlined, transparent sanctions framework that simplifies compliance and enhances regulatory clarity.

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Summary: The UK Government’s AML Reform Consultation proposed streamlining the supervisory regime to improve effectiveness, accountability, and alignment with international standards. It explores four potential models, aiming to reduce fragmentation and enhance risk-based oversight.

Impact: Potential overhaul of the supervisory framework, aiming to reduce fragmentation, improve consistency, and enhance risk-based oversight.

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Summary: The Law Society highlights the UK Government’s proposed reforms to the AML supervisory regime, aiming to improve effectiveness, reduce fragmentation, and align with FATF standards. It supports a more consistent, risk-based approach and emphasizes the importance of legal sector engagement in shaping the future framework.

Impact: This will improve the legal sector’s voice in shaping a more consistent, risk-based, and effective framework. By supporting consolidation and clearer accountability, it helps ensure that future supervision aligns with FATF standards while safeguarding the unique needs of legal professionals and their clients.

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Summary: The UK Government outlines key techniques used in trade-based money laundering (TBML), including over- and under-invoicing, multiple invoicing, and misrepresentation of goods. These methods exploit international trade systems to disguise illicit financial flows and evade detection.

Impact: The impact of the UK Government’s TBML handbook is to strengthen awareness and detection of trade-based money laundering risks across sectors.

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Summary: Transparency International UK’s report exposes major gaps in the UK’s AML supervision, citing fragmented oversight and weak enforcement. It calls for legislative reform and stronger accountability to meet FATF standards and effectively combat financial crime.

Impact: Sharp spotlight on the UK’s fragmented and under-resourced AML supervision. It urges legislative reform to consolidate oversight, improve enforcement, and meet FATF standards.

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Summary: The OFSI Annual Review 2024–25 outlines the UK’s approach to implementing financial sanctions, focusing on compliance, enforcement, and frozen asset monitoring. It highlights efforts to strengthen capabilities and ensure effective sanctions enforcement across sectors.

Impact: More robust and transparent UK sanctions regime. It enhances enforcement capabilities, promotes better compliance across sectors, and reinforces the UK’s global leadership in using financial sanctions to counter threats and uphold international security.

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