British Regulator Cuts AML Investigations by Half in 17 Months

By Koos Couvée

Britain’s Financial Conduct Authority has reduced the number of investigations into companies suspected of breaching anti-money laundering rules by half since September 2022, suggesting that the regulator has taken a new approach against AML violators.

Figures obtained by ACAMS through a freedom of information request show that the FCA as of January had 19 active investigations into companies suspected of breaching the U.K. Money Laundering Regulations, down from 38 in September 2022. The agency finalized five AML-related penalties for £128 million combined during those 17 months, led by the extraction of £108 million from Banco Santander.

Guy Wilkes, a former attorney at the FCA, described the sharp drop in AML cases as unsurprising in light of criticism that the previously large number of active investigations, many of which began years ago, had sapped the agency’s limited resources.

In June, the Upper Tribunal in London, which reviews challenges against the FCA’s enforcement decisions, overturned the agency’s lifetime bans against three former bankers at Julius Baer who allegedly entered into a corrupt financial arrangement with an employee of Russian oil conglomerate Yukos Group between September 2010 and February 2012.

The tribunal also criticized the FCA for waiting five years after informing one of the bankers of the investigation to take action against her, and urged the agency to consider the ethics of pursuing a case “which it does not have the resources to complete within a reasonable period of time and where it has decided that its priorities for its limited resource lie elsewhere.”

The decline in active cases overlaps with the appointment of new co-directors of enforcement at the FCA: Therese Chambers, who took up the role in April 2023, and Steve Smart, who joined from the U.K. National Crime Agency two months later.

“We’re also seeing a shift towards doing more supervisory-type actions, such as the imposition of business restrictions, and more resource has been put into that,” said Wilkes. “Cases that would’ve gone into enforcement are being dealt with using supervisory powers, which has the advantage of being faster and can achieve similar ends.”

Enforcement by other means

The FCA’s possible shift towards addressing violations through enhanced supervision rather than enforcement is most apparent with electronic money institutions, which were on the receiving end of two public rebukes from the agency last year amid concerns that many of the platforms neglected to build adequate defenses against fraudsters and money launderers.

The regulator imposed business restrictions on two EMIs in 2021, five in 2022 and a dozen last year, including London-based Dzing Finance after another regulator linked the platform to authorized push-payment fraud, and London-based Nvayo, whose owner faces U.S. charges of transmitting millions of dollars without a license.

Currently, Dzing, Nvayo and 12 other EMIs face a variety of restrictions, such as prohibitions on onboarding new customers and paying shareholders, the FCA told The regulator has opened one AML investigation involving an EMI and closed the books on another since 2021.

The FCA also sometimes commissions “skilled persons reviews” under section 166 of the Financial Services and Markets Act 2000, a process that usually entails an external accounting firm or law firm investigating the AML program of the company in question, producing a report and recommending upgrades.

From April 2021 to March 2022, the agency commissioned six section 166 reviews of EMIs for AML purposes, two over the 12 months that followed and another six from April to November of last year.

Nine EMIs are currently subject to section 166 reviews, according to the FCA, but the inspections can be “diagnostic in nature” and do not always end with a finding of violations.

Ruth Paley, a partner at Eversheds Sutherland in London, told that while the number of open AML investigations and section 166 reviews of EMIs may seem low in light of the FCA’s public rebukes of the sector, many of the cases could end in enforcement.

That allegedly widespread failures by EMIs to monitor clients throughout the course of their relationship with them—a theme of nearly all of the FCA’s actions against banks—has yet to trigger enforcement against any of them probably stems from the sector’s nascency, Paley said, noting that many of the U.K. platforms launched only a few years ago.

The FCA may also take the view that many EMIs have yet to handle and keep details on enough transactions to form a comprehensive picture of their anticipated finances and screen subsequent payments against it.

“The FCA can sometimes be generous towards firms … if there is scope to allow them to embed their compliance programs,” said Paley. “Having said that, the figures may not reflect the fact that there is a pipeline of firms under additional scrutiny, which may well lead to a higher number of cases being opened in the next two years or so.”

Contact Koos Couvée at

Topics : Anti-money laundering
Source: United Kingdom: Financial Conduct Authority , United Kingdom
Document Date: February 9, 2024