The FCA has highlighted the need for wholesale brokers to strengthen their systems, controls, risk awareness, and training to combat money laundering effectively.

In a recent review, the FCA emphasized the critical role wholesale brokers play in capital markets by facilitating transactions and highlighted the importance of robust anti-money laundering measures within the industry.

To gain a comprehensive understanding of the challenges, the regulator also engaged with other market participants, acknowledging that collaboration across the sector is essential for meaningful progress. The findings from this report are intended to guide all firms involved in capital markets to enhance their financial crime prevention measures.

Since the FCA’s 2019 Thematic Review, significant improvements have been made in several areas, including:

• Customer risk assessments.
• Onboarding processes.
• Governance and oversight.
• Collaboration between trade surveillance and transaction monitoring teams.

Despite these advancements, the FCA identified key areas requiring further attention to protect against money laundering risks:

• Firms often underestimate the money laundering risks they face.
• There is an over-reliance on other entities in the transaction chain to carry out due diligence checks.
• Limited information sharing between firms hinders effective detection.
• Insufficient awareness of the “money laundering through the markets” suspicious activity reports glossary code.

Steve Smart, Joint Executive Director of Enforcement and Market Oversight at the FCA, commented:
“The flow of capital is fundamental to a thriving and competitive market, but we must ensure it is not contaminated by criminal funds. For the UK’s financial services sector to grow, trust and integrity are paramount. Firms play a vital role in detecting and preventing financial crime.”

He urged firms to regularly review their controls to ensure they remain effective against evolving financial crime risks.

The FCA remains committed to collaborating with firms, industry stakeholders, and law enforcement to enhance the understanding of emerging risks, improve information sharing, and encourage innovation in transaction monitoring.