A recently published survey from the Financial Conduct Authority (FCA) has uncovered troubling weaknesses in how corporate finance firms are managing and failing to manage, financial crime risks.
Corporate finance firms play a vital role in enabling businesses to raise capital, link with investors and lenders and support growth across the UK economy. FCA’s findings suggest many firms are falling short and with the sectors’ exposure to money-laundering and other financial crime risks, rigorous oversight is non-negotiable.
Key Findings
The survey, which covered 270 corporate finance firms, indicates several significant gaps:
- 11% of respondents reported they had no documented business-wide risk assessment, a requirement under the Money Laundering Regulations. Without such an assessment, firms leave themselves and the wider market vulnerable to fraud and money-laundering.
- 10% of firms said they did not retain documented evidence of customer due diligence. That means the basic work of knowing who you’re doing business with might not be formally recorded in a significant minority of firms.
- Among principal firms supervising appointed representatives, 29% said they did not conduct financial crime risk assessments of their ARs and 6% reported no monitoring (via audits or onsite visits) of their ARs’ financial-crime compliance.
Why It Matters
These gaps should serve as a warning. Even if your business is not a “corporate finance firm” in the narrow sense, the lessons are relevant: documenting risk assessments, retaining evidence of due diligence and supervising any representatives or intermediaries are foundational elements of compliance.
When these controls are missing or weak, the risk of being exploited by money-laundering, fraud or other financial crime grows significantly. The FCA emphasises that while some firms are doing well, many may be falling short of minimum regulatory requirements.
What Firms Should Do
- Ensure the firm has a written, business-wide risk assessment that is regularly reviewed and updated to reflect changing risks.
- Maintain documented evidence of customer and transaction due diligence and ensure records are readily accessible.
- If you oversee appointed representatives (or similar intermediaries) or are an appointed representative, establish robust oversight including risk-assessments, monitoring programmes and audits or visits.
- Use management information (MI) to feed senior management on financial-crime issues. Indeed, the FCA found good practices where firms regularly escalate concerns to senior leadership (97% of respondents said they did).
Final Thoughts
The FCA survey signals that even established firms sometimes lack critical controls. For any regulated firm in the credit and finance ecosystem, now is the time to review governance, risk assessment frameworks and oversight processes. Ignoring the warning signs could leave your firm exposed and regulators increasingly vigilant. This is why we work with our ARs to ensure that your business isn’t at risk.
