FCA Dear CEO letter to Wholesale Brokers & Money Laundering Control issues

This FSC Dear CEO letter details

• The FCA view of the most important risks arising from wholesale brokers,
• What the FCA think drives those risks, and
• The FCA's supervisory focus for the next two years.

The FCA expect the Board of directors of wholesale brokers to discuss the contents of this letter, consider how the risks apply to business and take action to manage them effectively.

EXTRACTS

The FCA see a gradual improvement in inherent conduct risks facing the sector but with many false starts and laggards.

While The FCA has seen some improvements in governance and compliance controls at larger firms, its work suggests wholesale broking firms generally remain behind others in stopping poor conduct and improving culture.

This view is supported, for example, by its  recent work to assess brokers' controls against financial crime, which found

• Weaknesses in many firms, notably that few firms turn away new or existing clients regardless of the level of money laundering risk they pose.

The FCA expect firms to comply with all relevant FCA rules, to consider appropriate guidance, and to have adequately resourced risk management and control functions with influence at the board level.

To achieve effective compliance, firms should stay abreast of the risks posed by their business models, design clear policies and processes around those risks and promote a culture where adherence to their rules is actively encouraged.

Financial crime and market abuse mitigation are areas where The FCA commonly find brokers have weak systems and controls, and firms should continue to develop safeguards to mitigate these risks.

The FCA's recent work highlighted widespread deficiencies in wholesale brokers'

• Client onboarding processes to control financial crime and money laundering

Source - read the whole letter

https://www.fca.org.uk/publication/correspondence/wholesale-brokers-portfolio-letter-2023.pdf