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A recent survey conducted by the Financial Conduct Authority (FCA) examining sanctions controls at 90 UK firms has revealed a range of deficiencies across crucial areas such as staffing, technology, and reporting frameworks.
The regulator’s findings indicate that some firms still lack adequate resources to ensure effective sanctions screening. Additionally, it observed poorly calibrated or tailored screening tools within certain firms, with an overreliance on third-party providers lacking effective oversight.
The survey also highlighted shortcomings in Customer Due Diligence (CDD) and Know Your Customer (KYC) procedures. The FCA noted instances of low-quality CDD and KYC assessments, along with backlogs.
Another issue identified was the timeliness of reporting breaches, which was found to be subpar, marked by inconsistencies among different firms.
Addressing attendees at the Financial Crime Summit, Sarah Pritchard, Director of Markets and International at the FCA, emphasized that firms merely engaging in “tick box” compliance exercises should expect visits from the FCA.
She stressed the importance of taking proactive steps, as early action can potentially save firms significant fines in the future and safeguard their reputations.
Pritchard cited the period leading up to Russia’s invasion of Ukraine, during which numerous firms procrastinated, leading to unmanageable backlogs. She also highlighted the misconception that off-the-shelf tech solutions would suffice for addressing these issues.
Pritchard emphasized that firms cannot outsource risk calibration entirely to third parties and must take responsibility for managing their risks comprehensively, both high and low. It is essential for firms to adopt a proportionate and risk-based approach to effectively address these challenges.
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