Thematic Review Finds Failings Amongst Asset Managers

A review by the Financial Conduct Authority (FCA) has revealed that many asset management firms and fund administrators do not have effective anti-money laundering and corruption measures in place.

The FCA has analysed over 20 firms and although it said that many organisations had well-developed arrangements for the ownership of money laundering and bribery and corruption risk, there were also common weaknesses.

The regulator said: “Given our strong regulatory focus and previous publications on anti-money laundering and anti-bribery we expected firms to have taken more action to ensure their controls reduced the risk of money laundering and bribery and corruption.

”Our findings were of particular concern where the firms were part of major financial groups, which should have been aware of our expectations. In some cases, the firms we visited were from groups that had been subject to previous regulatory attention but we still found significant weaknesses.”

In summary, the review found that anti-money laundering and anti-bribery and corruption issues were dealt with primarily as a compliance matter rather than as part of proactive risk management.

Although most firms had a comprehensive suite of anti-money laundering policies, some firms were found not to have controls for assessing, classifying and recording risks posed by new customers. The FCA was concerned this meant that enhanced due diligence was not always carried out for high-risk customers.

The report also identified weaknesses in how most firms acted on the outcomes of risk assessments. It also discovered that the longstanding nature of some business relationships were felt to be a satisfactory substitute for keeping customer due diligence information up to date.

Expert Opinion

Although the FCA’s assessment concerns just 22 firms, many of the issues highlighted will be relevant across the sector. <br/> <br/>“The regulatory fines for failing to have adequate systems and controls to prevent financial crime can be significant and we would urge relevant businesses to familiarise themselves with this thematic review and take action on the points raised and outlined by the FCA. At worst individuals could find themselves at risk of criminal investigation.” <br/>