FCA Raises Concerns over Challenger Banks’ Financial Crime Controls

The Financial Conduct Authority (FCA) recently released the outcomes of its review regarding the risk assessment by challenger banks. According to the authority, the review found weaknesses in some challenger banks’ financial crime controls.

The FCA noted that in some instances challenger banks did not have appropriate financial crime risk assessments for their clients. The review, which was conducted over the last year, identified a sharp surge in the number of suspicious activities reported by the challenger banks.

The Financial Conduct Authority is planning to tighten its grip around illegal financial activities under its jurisdiction. The regulatory authority mentioned that the challenger banks need to appropriately check the income and occupation of their customers.

“Our 3-year strategy highlights our commitment to reducing and preventing financial crime. This is important in creating that confidence for consumers and market participants in financial services and in demonstrating that the UK is a safe place to do business,” Sarah Pritchard, Executive Director of Markets at the FCA, commented.

Recently, the FCA warned against rising crypto scams in the region.

Challenger Banks

Amid a rapid jump in the adoption of digital tools in the banking sector, challenger banks have gained significant popularity among UK residents in the past few years. The FCA highlighted the benefits and convenience of challenger banks for retail customers but also noted that the players in the industry need to work on their financial crime defence to prevent issues in the future.

“The FCA’s review during 2021 found some evidence of good practice, for example, innovative use of technology to identify and verify customers at speed. The review focused on challenger banks that were relatively new to the market and offered a quick and easy application process. This included 6 challenger retail banks, which primarily consist of digital banks and cover over 8 million customers,” the authority added.