In April 2008, the FSA launched a major thematic project which was aimed at establishing the extent to which small firms across the financial services industry addressed financial crime risks in their businesses. The review covered:

  • Anti-money laundering policies and procedure.
  • Firms' consideration of the Joint Money Laundering Steering Group (JMLSG) guidance.
  • Role of the Money Laundering Reporting Officer (MLRO) and Compliance Officers.
  • Suspicious activity reports (SARs) to the Serious Organised Crime Agency (SOCA).

The FSA’s conclusions from the review include:

  • While firms generally had adequate customer due diligence arrangements, it was concerned by the weaknesses it had identified in firms’ enhanced due diligence procedures for dealing with high risk customers or situations.
  • The importance of robust customer due diligence to prevent firms undertaking business with individuals or entities subject to financial sanctions is clear.
  • Small firms remain weak in their knowledge and implementation of the UK financial sanctions regime.
  • Generally, firms had greater awareness of the need for anti-money laundering and data security systems and controls than of those preventing fraud.
  • While few firms had developed specific fraud controls to reduce the risk that their firm might be used to ease fraud, recorded fraud incidents and losses by firms visited were low.
  • The small firms sector is generally weak in its assessment and mitigation of financial crime risks.

The report does not constitute formal FSA guidance. However, the FSA expects firms to make use of the report, to translate its findings into a more effective assessment of the risks in their business, and to implement and maintain more effective and appropriate controls where necessary.

View The Small Firms Financial Crime Review, 24 May 2010