On September 6, 2023, the Financial Conduct Authority (FCA) published its findings on sanctions systems and controls in financial services firms. The report presents key findings outlining best practices and areas for improvement to enhance compliance. This applies to all registered UK firms within the FCA’s regulatory and supervisory scope, particularly targeting Money Laundering Reporting Officers (MLROs), Nominated Officers, and industry practitioners in financial crime compliance roles. It is also relevant to Payment and Banking Services (PBSs) supervised by OPBAS.

Here are some notable findings from the report:

• Senior management in UK multinational firms often lacks sufficient information and management skills to effectively handle sanctions risks. They often rely on foreign systems and lack basic risk metrics. Firms are advised to provide their senior management with sufficient information to ensure that global sanctions policies align with UK regulations.
• Firms frequently encounter issues when calibrating and updating sanctions screening tools, resulting in incorrect screening, missed names, and false positives.
• Sanctions screening tools must be calibrated to meet UK regime requirements. Some firms have well-calibrated tools, while others rely on inadequate third-party providers.
• Global firms’ policies do not always align with UK sanctions; some focus more on US sanctions and neglect UK sanctions. This necessitates increased communication between global and regional teams.
• The quality of Customer Due Diligence (CDD) and Know Your Customer (KYC) assessments is hampered by low-quality assessments, posing a risk to firms that may fail to identify sanctioned individuals or corporate structures. Firms must conduct thorough KYC and CDD to ensure they screen all relevant parties and comply with relevant sanctions requirements.
• Inconsistent reporting of potential sanctions breaches has been observed, highlighting the need for more timely and accurate reporting.