The UK’s Financial Conduct Authority has been making waves with regulated firms’ sanctions compliance following the publication of a new report and a speech given by Sarah Pritchard at the 1LOD Financial Crime Summit. 

The FCA assessed sanctions controls at 90 financial services firms and have announced their findings.

The least-surprising observation is the FCA observed a wide-range of governance and oversight, ranging from firms that undertook advance planning before February 2022 to those still struggling to provide proper MI to their senior stakeholders.

Standout findings for me from this report were:

• Horizon scanning must be part of risk management.  The FCA identified clear differences between firms that undertook advanced scenario planning and risk assessments before Feb 2022 and those that did not.  Those who planned ahead had a much clearer idea of their potential exposures as the new sanctions started pouring out of government offices.
• Global policies can overlook local requirements.  Some global firms focussed on US sanctions and policies were not properly aligned to the UK sanctions regimes, leading to increased sanctions risks, including the risk of a sanctions breach – a very serious event in a regulated firm.
• Firm need to avoid over-reliance on third party systems.  Not all firms truly understood the list management and calibration of their third party screening tools and this can result in gaps or poorly calibrated systems.
• “Many firms” had insufficient resourcing in their sanctions teams.  The review highlighted delays in managing sanctions alerts and in customer due diligence reviews, together with significant backlogs.  Many firms will have gone into Feb 2022 with ‘lean’ teams and were not able to scale up quickly when new, iterative waves of sanctions were being announced.

The lessons that emerge from these findings are not new, but executing them well can be difficult in a busy, demanding environment. 

If you need support with training, policy development, remediation or risk assessment then contact us for a confidential discussion.

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