The regulator also highlights the important interplay between anti-money laundering procedures, explaining that effective customer due diligence and know your client assessments are a cornerstone of sanctions compliance.
It contains specific guidance on best practice, which will be useful to money laundering reporting officers in designing and operating their compliance programmes. But with only four examples of good practice and three of poor practice, the FC Guide will still leave a lot to interpretation.
Transaction monitoring
The proposed changes to the FC Guide also address transaction monitoring, which is a key control for almost all the companies the FCA supervises.
The regulator recognises the sector’s desire to adopt and utilise new technologies in the fight against financial crime, but notes that this is often let down by poor deployment and so provides guidance on implementing and operating automated transaction monitoring systems.
Helpfully, the FCA also makes clear that automation is not required where manual processes achieve an effective outcome, emphasising the fact that the important factor is to have effective transaction monitoring rather than just opting for the shiny new tools on the market.
In terms of the transaction monitoring guidance, the regulator provides a new set of self-assessment questions and extensive examples of best practice, together with a case study, to help companies to ensure that automated transaction monitoring systems are configured appropriately in view of the financial crime risks they face.
However, it often appears that criminals are one step ahead. For example, they have been incredibly quick to adopt generative AI and deepfakes to commit more frauds that are harder to detect and defend.
Tackling financial crime requires cross-sector international co-operation. This is not solely an issue for the financial services sector, other sectors such as Big Tech need to be encouraged to do more in the battle against financial crime.
Ben Cooper is a partner in TLT’s economic crime and compliance team
