AML Derisking Strategy Leads to Heightened FCA Scrutiny

May 26th, 2015

Today, the Financial Conduct Authority (FCA) published its Regulation Round-Up for May, in which it reiterated earlier messaging around appropriate anti-money laundering (AML) strategies.  A month ago, the FCA published a notice on the concerning trend of derisking that the agency has identified.  In the notice, the FCA encourages banks to pursue a more individualized approach to AML risk assessments, stating, “we expect banks to recognise that the risk associated with different individual business relationships within a single broad category varies, and to manage that risk appropriately.”  This approach is in contrast to what the FCA observes as “wholesale derisking,” in which entire classes of clients are excluded from certain services because of perceived AML risks.

This issue was echoed in the Regulation Round-Up, which states, “Banks have told us that this helps them comply with their legal and regulatory obligations in the UK and abroad. However, we are clear that effective money-laundering risk management need not result in wholesale derisking.”

Importantly, it appears that the FCA has responded to this issue with heightened scrutiny.  The recent notice indicates that the FCA will now review for competition and consumer issues associated with AML compliance programs. The FCA states, “we now consider during our AML work whether firms’ derisking strategies give rise to consumer protection and/or competition issues.”

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