FCA announces introduction of ‘Financial Crime Returns’

The UK’s financial services regulator has issued what it says are the final rules governing a new system for ensuring UK financial services businesses with annual revenue of more than £5m are fully complying with regulations aimed at preventing financial crimes, such as money laundering.

Under the new rules, such entities as banks, building societies, investment firms, mortgage lenders, life insurers and retail investment and mortgage intermediaries that are in the category of “firms subject to money laundering regulations” will be obliged to file a financial crime return annually, if they are above the £5m revenue threshold.

In a policy statement published on Friday, the Financial Conduct Authority said companies that are required to file the new returns will be obliged to do so for the first time in March 2017.

The publication of the new Financial Crime Reporting returns requirements comes a little more than six months after the FCA consulted on proposals to introduce such a system of formalised data collection, as part of its regular quarterly consultation on amendments to its rules handbook.

Explaining the thinking behind the decision to make changes to the so-called Supervision manual, or SUP, the FCA said: “Financial crime is a priority…we have a statutory duty to enhance the integrity of the UK’s financial system, which includes protecting it from exploitation by criminals.

“[However], at present our financial crime supervisory work relies on the use of ad hoc data requests to gather information about firms’ systems and controls.”

The FCE said it estimated that its new Financial Crime Return would initially affect approximately 1,400 companies, after pure general insurers and general insurance intermediaries were removed from the initial implementation, to be added at a later date. Companies will be expected to submit their annual Financial Crime Returns within 60 business days of their accounting reference date.

A firm must submit the Annual Financial Crime Report within 60 business days of the end of the firm’s  financial year.

The regulator said it would collect the data using its electronic reporting system, known as Gabriel.

Costs ‘difficult to estimate’

The FCA admits that complying with the new rules will be a new cost for those firms that are required to file Financial Crime Returns, but says that estimating just how costly “is very difficult”.

“Feedback from those responses suggested that one-off compliance costs to introduce the requirement to collect and report the data…could range from £0 to £85k per individual firm, and incur annual costs of anywhere between £0 and £12k per firm”, based on the nature of the business, the FCA notes, in its policy statement, More “complex” businesses would have to pay more initially, though ongoing costs would be “minimal”, it adds.

“Taking the higher figures in each case, and weighting for sector size, we estimate that the aggregated implementation costs, based on the upper limits of the figures provided, would be £9.9m (or £14k per firm on average), while the estimated ongoing costs are estimated at £700k (or £500 per firm on average).”

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