December 3, 2024

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by: kiran

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Tags: "Regulation"

What the FCA’s Financial Crime Guide Updates Mean for Insurance Firms

With the growing number of fines issued by the FCA for financial crime failures, it’s no surprise that this issue remains a top priority for many firms.

To support firms in navigating these challenges, the FCA’s Financial Crime Guide (“The Guide”) has long offered practical advice, examples of good practices, and strategies to reduce the risk of financial crime. In April 2024, the FCA launched a consultation to update The Guide, focusing on areas like sanctions, proliferation financing, transaction monitoring, cryptoasset businesses, the Consumer Duty, and other consequential changes.

Following the consultation, the FCA has now published its feedback and finalised updates to The Guide.

Key Updates:

The changes introduce several important measures for insurance firms, aimed at strengthening financial crime controls and aligning them with emerging risks:

Enhanced Sanctions Controls:
In light of geopolitical events such as the Russia-Ukraine conflict, firms must reinforce their sanctions compliance frameworks. Key expectations include enhanced due diligence, continuous monitoring for sanctions breaches, and prompt notification to the FCA in cases of significant control failures. Senior management must actively oversee sanctions risk management, with clear accountability and evidence of engagement.

Proliferation Financing Risk Management:
Firms are now required to assess and mitigate risks related to proliferation financing (e.g. financing weapons of mass destruction). This update aligns with changes to the Money Laundering Regulations (MLRs) and necessitates rigorous control measures.

Transaction Monitoring:
The Guide underscores the importance of robust transaction monitoring systems, particularly for detecting suspicious activities. Firms should explore advanced monitoring tools that align with their transaction complexity and volume.

Cryptoassets Oversight:
Firms dealing with cryptoassets must comply with AML and CTF rules. The updated guidance encourages leveraging technology to enhance blockchain-based monitoring and control.

Consumer Duty Alignment:
Firms must ensure their financial crime controls align with Consumer Duty obligations. This includes implementing fraud prevention measures that enhance consumer outcomes and safeguard vulnerable customers.

While these updates do not establish new formal rules, they clarify FCA expectations for robust financial crime systems and controls, urging firms to review and adapt their practices.

What Firms Need to Do:

Firms should assess their financial crime systems and controls in light of the updated guidance. This may involve updating internal policies, improving monitoring systems, enhancing training programs, or strengthening governance frameworks.

Recent enforcement actions show that the FCA takes a firm stance on failures in this area. The FCA has also indicated that ongoing engagement with firms could lead to further updates to The Guide.

We can help you interpret the updates and assess their implications for your firm. Our services include evaluating your financial crime controls to ensure they are robust, compliant, and aligned with Consumer Duty expectations.

Additionally, our partner company, Ever Comply, offers solutions to help firms meet financial crime and Consumer Duty requirements. If you’d like to learn more or see a demo of their system, contact us here.