Investment firms need to boost their defences against money launderers and financial criminals, the U.K.’s Financial Conduct Authority (FCA) said in a report released Thursday.
The report detailed the results of the FCA’s review of money laundering in capital markets, which found gaps in brokers’ defences, and called on them to enhance their systems, controls, and training to guard against financial crime.
Among other things, the regulator found that firms underestimated their exposure to the threat of money laundering, that they relied too heavily on others for due diligence, and that information sharing between firms remains too limited.
As a result, the FCA said that firms need to continue to review their systems, controls, money laundering awareness and training.
“We expect firms to have robust financial crime systems and controls at each stage of the customer and transaction journey. This is essential to make sure there are no ‘weak links’ that expose participants and the overall transaction to financial crime,” the regulator said in the report, which added guidance and detailed best practices for beefing up firms’ controls.
“The flow of capital is an essential part of a thriving and competitive market, but tainted cash must not be allowed to pollute the rest,” said Steve Smart, joint executive director of enforcement and market oversight at the FCA, in a release.
“For the UK financial services industry to grow, investors and institutions need to have trust in it. Integrity is vital for that, and firms play a key role in helping to detect criminal activity,” he added. “Firms need to keep their controls under review and ensure they are effective against financial crime.”
The FCA said that it will continue to target money laundering risks in its industry compliance work, while also working with firms and law enforcement, “to improve understanding and sharing of information about emerging risks and to encourage greater innovation by firms with transaction monitoring.”