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Dear Chief Executive | Release Date: 29th June 2021

To read a longer summary of this Dear Chief Executive letter, click here.

To access the original FCA document, click here.

Short Summary

The Financial Conduct Authority (FCA) has identified persistent weaknesses in the anti-money laundering frameworks of some retail banks, despite previous reminders and regulatory interventions. These weaknesses predominantly concern governance, risk assessments, due diligence, transaction monitoring, and suspicious activity reporting. Failings in these areas risk exposing the financial system to criminal activities, undermining the integrity of the UK financial market.

The Senior Managers and Certification Regime (SMCR) emphasises that senior management is accountable for preventing their firms from being used for financial crimes. Specific responsibilities fall on those holding Senior Manager Function (SMF) roles, especially the Money Laundering Reporting Officer (SMF 17) and those with Prescribed Responsibility for Financial Crime.

Banks are instructed to undertake a comprehensive review of their financial crime controls and address any gaps by September 17, 2021. They must ensure that their systems and controls align with the requirements of the MLRs and the FCA’s expectations as detailed in the SYSC 6.3. The FCA expects senior managers to ensure the effectiveness of these controls and demonstrate compliance in future assessments. Failure to comply could result in stringent regulatory actions including enforcement measures.

Key Takeaways and Actions:

Banks must critically assess and enhance their financial crime frameworks to address identified weaknesses. Senior managers should ensure these frameworks comply with regulatory expectations and prepare to demonstrate this compliance during future FCA engagements. Non-compliance may lead to severe regulatory consequences.

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