Jonathan Cowey, Business Director for Regulated Services at Webhelp UK, considers what the FCA’s new anti-money laundering bill means for UK financial organisations.

The demand for change 

Increased sanctions by the UK Government have made big headlines. As part of this, the Financial Conduct Authority (FCA) has written to all financial services firms regarding a new bill that is being fast tracked through the UK Parliament. This bill includes many things, one of which is a new register which mandates that all foreign owners of UK property must declare and verify their identity with Companies HouseThe purpose of this is to ultimately stop sanctioned individuals from buying and selling property in the UK for example – a long standing issue which has been exposed as a channel for money laundering.

What do firms need to be aware of and be thinking about? 

As part of their Anti-Money Laundering (AML) compliance, firms must consider UBOs – Ultimate Beneficiary Owners – of corporate organisations. UBO governance is not a new thing within UK finance, and has long been part of AML checks and due diligence both in terms of onboarding new clients into the financial system, and the ongoing monitoring of the account.  The whole point here is to know exactly who the beneficial owner of that company’s activity is – we need to ask ‘who is at the end of the chain?’  By properly assessing an individual UBO or a group of UBOs at both on-boarding and during the lifecycle of the client engagement, this will play a big part in ensuring a company isn’t inadvertently involved in financial crime. 

The latest message from the FCA is a firm and clear reminder to organisations that they should be fully assessing UBOs. 

So what’s the issue? 

Whilst many organisations are likely to be doing some form of UBO checking, there is growing concern that practices are outdated, acting as a tick box exercise as opposed to meaningfully seeking to understand the true end beneficiary. This isn’t overly surprising as UBO checks can be challenging. There are an estimated 3,000+ shell companies in the UK, so breaking through the layers of corporate structure to truly understand what is going on and by who isn’t an easy task. Finding your way through complicated corporate set-ups is something that takes time, skilland therefore cost. The reality is however, the FCA will want to see demonstrable evidence that organisations have undertaken the right level of due diligence and can show the right level of UBO informationwhether that be corporate structuresboard member information, fund attestation or proof of address…all certified of course. Bottom line, this isn’t a nice to have but a MUST do. 

Can organisations stand still? 

Simply put, no. Organisations can’t just rely on what they have always done. Here’s why: 

Firstly – it is their obligation; it’s a regulatory requirement, and failure to do this can see hefty fines imposed. There is major precedent for this too. The FCA levied nearly £570m of financial penalties on organisations during 2021, 84% of which (£477m) related directly to failings within AML compliance, with UBO being a key facet to this.

Secondly – costs. When not done correctly, the costs to remediate back books and the operational upheaval to put things right far outweighs the costs of simply getting it right in the first place.  

Thirdly – and most importantly in my view – ethically; it is the right thing to do. It is the moral obligation of institutes to ensure they are acting and enabling a safer, more secure world – their customers expect it of them. 

It’s time to act

Taking a risk-based approach to compliance is always the right thing to do, but firms must shine a spotlight within their own organisations. The time to act is now, and firms should be undertaking a current state assessment against the existing landscape to ensure they are compliant. In order to do that, many firms are looking for partners to support them on that journey, bringing fresh industry perspectives, know-how and new solutions to the table. This isn’t an easy thing to do and gaining the right partner to do this in the right way (such as balancing costs, assessing the customer experience and properly mitigating risks) will be key.  

At Webhelp, we offer a full KYB/UBO compliance capability; consultancy expertise, technology solutions, as well as skilled KYB, AML and compliance resources globally to support you on this journey. We partner with many financial services organisations, both here in the UK and across the globe with their AML programmes.

Jonathan Cowey is the Business Director for UK Regulated Services at Webhelp. Please do not hesitate to get in touch if you have any questions and he will be happy to discuss with you