The FCA issues a “Dear CEO” letter urging thorough gap analyses & a US District Court judge rules the CTA unconstitutional

On March 5, the Financial Conduct Authority (FCA) issued a letter to CEOs regarding anti-money laundering (AML) control failings. The letter targets about 1,000 Annex 1 firms, including lenders, safe custody providers, money brokers, and financial leasing companies. The regulator called out four key areas of concern, including discrepancies between firms’ registered and actual activities, weak risk assessments, lack of detail in due diligence policies, and inadequate training. The letter's primary call to action is for firms to conduct a gap analysis against the common weaknesses mentioned within six months. Senior compliance staff should note that during any future engagements with the FCA, the regulator will likely request the results from the gap analysis, proof that actions were taken to address any gaps identified, and updates on the progress of any testing to confirm that policies, controls, and procedures are effective and operating as intended.

A recent US District Court judge ruling has deemed the Corporate Transparency Act (CTA) unconstitutional. Consequently, the government is prohibited from enforcing it against the National Small Business Association, the lead plaintiff, and its 65,000+ members. The plaintiffs had argued that the CTA places an unfair burden on small businesses by requiring them to disclose highly personal information about their owners to the Financial Crimes Enforcement Network (FinCEN). On March 4, FinCEN addressed the court’s ruling in a press release, noting it would comply with the order and that it was not currently enforcing the CTA against the plaintiffs involved. The government has 60 days to appeal the ruling.

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Until next week,

Andrew Davies, Global Head of Regulatory Affairs