The opinions expressed here are those of the authors. They do not necessarily reflect the views or positions of UK Finance or its members.

This has, yet again, been demonstrated recently when the FCA issued two more significant fines, both for financial crime systems and control failings. 

There should be no doubt in anyone’s mind that the FCA are taking seriously their objective of protecting and enhancing the integrity of the UK financial system. They have been increasingly clear about their expectations of firms' approach to financial crime and sanctions risk management, with publications in the past year alone covering money mules, fraud, sanctions, PEPs and other common AML framework control failures. 

It’s important that firms keep up to date with all of these publications and use them as opportunities to see their own firm through the lens of the regulator. Consider each of the findings and check your own controls to see how you measure up. 

Hopefully, the most recent two cases will further focus the minds of senior managers in financial services firms to take their obligations seriously when it comes to financial crime prevention.

Unsurprisingly given the timeline of publications and events, each of these recent final notices includes themes previously highlighted in the FCA’s review of challenger banks, published back in 2022.  The key failures in the recent cases included failure to comply with AML and sanctions obligations, that controls didn’t keep pace with growth and data issues resulting in significant gaps in automated monitoring.

In both of the recent examples, oversight of third-party systems was inadequate, resulting in control gaps which were not identified for significant periods of time. 

Focussing on the automated processes which were at the heart of both of these fines, whether you have an in-house or external solution, you need to ensure that you understand exactly how it’s configured, and that it is fit for purpose.

In addition to working closely with your provider and your IT and data teams to ensure you have implemented and are operating their systems effectively, you should also seek independent assurance. Whether that’s a second or third-line activity, or if you decide to appoint an external specialist firm, you should test thoroughly and regularly to ensure that your monitoring and screening are in line with policy and that your data and system configuration are achieving the required results to manage the risks specific to your business.

Any concerns identified must be addressed quickly and the escalation and management of problems should be transparent. Taking action is vital, but equally important is demonstrating the effectiveness of the issues management process.

Internal changes, including growth, will inevitably change a firm's risk profile and therefore controls must keep pace. Alongside the changing controls, oversight must also evolve. Firms must ensure that ongoing risk and control assessments reflect the changing business.

The recent examples reiterate the point that the cost of non-compliance is far greater than getting it right from the start. Regulators are raising the bar, and firms must follow suit, not just to avoid penalties, but to protect their reputation and customers. Strong, adaptable controls and rigorous processes are essential, but they need thorough oversight and continuous adjustment. Investing in the right technology and expertise is crucial but so is maintaining a proactive mindset - one that views each regulatory update as a chance to refine and improve. In a fast-changing landscape, staying ahead is the only way to truly mitigate risk.