Financial Crime: Why Firms Can’t Afford to Stand Still

The pace of change in financial crime regulation shows no sign of slowing. Thistle Initiatives’ new Financial Crime Partner, Michael Knight-Robson, explains why bolstering the financial crime team is pivotal to ensuring our clients can respond to, and keep ahead of, regulatory demands.

For firms across the financial services sector, the question is no longer whether change is coming but how prepared they are to respond to it. Regulatory expectations are shifting rapidly, with supervisors setting a higher bar for effectiveness and proportionality in financial crime frameworks.

Over the last three months alone we have seen a series of major updates that cut across AML, fraud, sanctions and corporate transparency, each carrying significant implications for how firms manage risk and demonstrate compliance. They include:

• UK Money Laundering and Terrorist Financing Risk Assessment - After a five-year hiatus, the UK Government published its updated Money Laundering and Terrorist Financing Risk Assessment – with the EMI and PSP sector finally upgraded to high risk of money laundering and terrorist financing.
• Updated FCA PEP Guidance - The long awaited updated FCA Guidance on the Treatment of PEPs for AML purposes, confirming UK PEPs should generally be treated as lower risk, so long as no heightened risk factors are identified.
• NCA and FCA Priorities - The NCA and FCA published its updated priorities in combating financial crime, underlining the very real risks, crimes and consequences that occur across the UK, and therefore how firms should ensure it’s approach to compliance is purposeful.
• Go-Live of FTPF - The Failure to Prevent Fraud obligation on organisations went live, meaning firms should now have a robust fraud risk management framework from 1st September, aligned to the well-known six principles rolled out for other ‘failure to prevent’ legislation.
• Companies House enhancements - We are now starting to see progress at Companies House, with steps being taken to turn it into the reliable company register it was always intended to be. The introduction of identity verification at the point of registration is a key step in strengthening the UK’s corporate transparency framework.
• Sanctions Penalty – The Office of Financial Sanctions Implementation (OFSI) issued its first-ever financial penalty for failing to respond to a Request for Information, sending a clear signal of the UK’s focus on sanctions enforcement.

While these initiatives have been in the pipeline for some time, their recent roll-out highlights the relentless pace of change in this space. For firms, the message is clear: staying up to date isn’t a box-ticking exercise, it’s about playing a meaningful role in protecting the integrity of the UK’s financial system.

Now is the time for senior management to ask themselves:

• Is our financial crime framework aligned with the UK’s latest standards and guidance?
• Could we respond quickly and effectively to a regulator’s request for information?
• Are our controls genuinely helping to combat financial crime – or simply there to appease regulators?

I’m hugely excited to be joining Thistle Initiatives at such a pivotal time, helping our clients navigate not just today’s challenges, but the next wave of regulatory and industry change, including forthcoming amendments to the Money Laundering Regulations.

If you would like to discuss any of the developments above or would like an honest, proportionate and efficient view on how your financial crime compliance framework stands up against regulatory expectations, please do not hesitate to get in touch.

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