PwC's Managing upstream risk: Regulatory reform review - An asian perspective August 2013 | Page 12

2.3 AML and Financial Crime
Update
On 25 July 2013 the FCA published their Antimoney laundering annual report 2012/13”, setting out the authorities’ obligations relating to AML, approach to carrying out those obligations and the trends and emerging risks in money laundering observed in the market. Table x below provides a brief summary of important sections in the report.

Table 1: Summary of FCA’s AML annual report 2012/13 Sources of money laundering risks • Most important risks derive from breaches of the UK’s and other countries’ financial sanctions, terrorist financing, investment fraud, bribery and corruption. • International nature of the UK financial markets may be attractive to both legitimate and illegitimate businesses. • Firms may opt for higher risk funding sources, such as shareholdings from international sources where there may be lower AML compliance. • Regulated firms may take more risks over the sources of the funds they are prepared to accept, increasing the possibility that they may be handling the proceeds of corruption or other crime. • Domestic organised crime (e.g. sale of narcotics, people trafficking) continues to be a major concern • Developments in technology and international travel have increased the risk of illicit funds being transmitted through FCA-regulated firms. FCA responsibilities on AML • FCA is the supervisor under MLR 2007 and are responsible for ensuring that most authorised firms and all e-money institutions comply with the MLR 2007. • We are also responsible for what are known as ‘Annex I Financial Institutions’ such as financial leasing companies, safe custody services and money broking which are not authorised activities but subject to the FCA’s AML supervision. • The OFT is responsible for regulating consumer credit institutions until 1 April 2014. • Ensuring that all regulated firms operate the same AML standards outside the EEA as they do in the UK. FCA approaches to AML • Focus resources on firms that are particularly exposed to financial crime risk. • Aim to be proactive in solving any problems found, ensuring that firms are aware of their implications and how to mitigate them. • Ensuring that firms maintain and enhance their systems and controls against financial crime. • Adopt an intensive and intrusive approach with emphasis on early intervention and credible deterrence.

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Regulatory Reform Review | Banking