Findings from the Thematic Review of financial crime in the e-money sector

The FCA’s recent Thematic Review of ‘Money Laundering and Terrorist Financing in the E-Money Sector’ has found that the majority of the 13 electric money institutions (EMIs) visited had effective anti-money laundering (AML) systems and controls to mitigate their money laundering and terrorist financing risk. The FCA generally observed a positive culture and good awareness of financial crime obligations. Examples of good (and occasionally poor) practice identified among EMIs are included in the FCA’s report.

Most EMIs have updated their policies and procedures to comply with the most recent (2017) AML and terrorist financing regulations, including amending customer due diligence (CDD) processes to take account of the lower transaction thresholds and other changes to simplified due diligence (SDD). For example, the FCA found that firms were no longer providing e-money products previously offered under SDD to new or existing customers, and EMIs were requiring existing customers onboarded under the SDD provisions of the old 2007 regulations to undergo new risk assessments and be subject to complete, or standard CDD. 

Although the FCA found transaction monitoring to be effective, the quality of management information on money laundering and terrorist financing did vary. Senior management were better engaged and had a more effective understanding where the information had clearly identified key risks supported by data.

The majority of EMIs with outsourced distribution of e-money and compliance had adequate governance and audit measures to manage the risks of outsourcing these functions. Effective oversight included dip-sampling files to establish that CDD processes were performed correctly. Also, on-site visits and audits of outsourced suppliers were undertaken by firms, using a risk-based approach.

Although fraud was not within scope of the FCA’s thematic review, the regulator noted that EMIs saw fraud as a key risk – as evidenced by their business-wide risk assessments, transaction monitoring systems and other financial crime controls. 

The FCA also noted that money remittance is a higher risk business activity than e-money. The regulator reminds firms that their AML and counter-terrorist financing controls must be commensurate with the risks posed by money remittance. 

How we can help

With a depth of knowledge of the e-money and payments sector, our Regulatory team not only have technical knowledge to help you understand your compliance requirements but also the commercial understanding to help you thrive. Please contact the Regulatory Consulting team for more information and advice on any of these issues above.

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