Extension of the Annual Financial Crime Reporting Obligation

  • Posted on: 5 May 2021
  • Written by: Matthew Baxter

On 31 March 2021, the Financial Conduct Authority (FCA) published PS21/4, extending the scope of firms required to submit an annual financial crime report. Firms that already submit this return will know it as the ‘REP-CRIM’. This development was not surprising given the commitment in the FCA’s 2020/21 Business Plan to reducing financial crime across the financial services sector.

Additional Firms required to submit a REP-CRIM

To summarise, you will be required to complete and submit a REP-CRIM return if your firm is:

  • FSMA authorised falling with the scope of the Money Laundering Regulations (MLRs,) and which either holds client money or assets; or carries on an activity set out in 16.23 of Appendix 1 of the Policy Statement
  • A Payment institution, except those that only carry on at least one of the following: Money remittance; Account Information Services; or Payment Initiation Services
  • A Payment Institution registered under the Temporary Permissions Regime, but but with no physical presence in the UK
  • An Electronic Money Institution
  • A Multilateral Trading Facility (MTFs)
  • An organised Trading Facilities (OTFs)
  • A cryptoasset exchange provider and custodian wallet provider

Additionally, the FCA has noted a couple of additional exclusions from the REP-CRIM requirement as a result of the activities being outside the scope of the MLRs. These exclusions are for the activities:

  • Home finance mediation activity
  • Making arrangement with a view to transactions in investments

It should be noted that the changes implemented via this policy statement introduce the REP-CRIM requirement irrespective of total annual revenues.

Will this help reduce financial crime?

The obvious question is, how will this actually help the FCA achieve its objective of reducing financial crime?

The widened scope of firms completing the return will enable the FCA to gather extra firm and sector-specific data, providing additional context to the FCA on potential financial crime risks. The true impact of this change in reducing financial crime is likely to be immeasurable, but future measures implemented, by a more informed regulator, should ensure a reduction in financial crime activity across the financial services sector.

Completing a REP-CRIM

The REP-CRIM return will be completed via RegData. Firms that have been brought into scope are required to submit their first REP-CRIM within 60 business days of their accounting referencing date, from 30 March 2022.

The information required under the REP-CRIM is unchanged. As with all regulatory returns, the FCA provides guidance notes for completion of the Annual Financial Crime Report. The FCA’s existing guidance notes are in SUP 16 Annex 42B of the FCA Handbook. Additionally, SUP 16 Annex 42A of the FCA Handbook contains a copy of the REP-CRIM to enable firms to review the requirements in advance of a return being available for submission through RegData.

In summary, the REP-CRIM return requires firms to provide data on the following:

  • Operating jurisdictions
  • Customer information
  • Compliance information
  • Sanctions specific information
  • Fraud

Theoretically, the change should not be burdensome for the firms that are already in scope. As the FCA has stated in its Feedback Statement, firms are expected to already hold this data in order to effectively manage their financial crime risks. If your firm does not currently capture the data requirements of a REP-CRIM form, you will need to update your procedures to ensure you have the necessary data available when the time for submitting a return arises. Including this data in your management information is advisable. Additionally, if you do not currently collect the required data, given the FCA’s view that gathering this data would form part of the effective management of financial crime risk, it is necessary to consider the strength of your financial crime framework.

At Compliancy Services we are experienced in assisting firms (including those from the EEA) with their ongoing compliance obligations, including RegData Returns and Financial Crime Assurance Reviews. If you need support in preparing for the introduction of REP-CRIM for your firm, please do get in contact, we would be happy to help.