As financial institutions face increasing scrutiny and complex threats, understanding the current regulatory perspective is essential for effective risk management.
The FCA's January 2025 report on Money Laundering Through Markets (MLTM)1 highlights that despite progress, significant challenges remain in identifying and preventing illicit financial flows through capital markets.
The FCA noted that 75% of wholesale broker firms reported that they have not refused or exited any customers and have also not disclosed any Suspicious Activity Reports (SARs) to the National Crime Agency during the reporting period. This statistic raises questions about whether current detection methods are sufficient to identify suspicious activities.
Transaction monitoring emerges as a critical focus area in the FCA's report. Many firms struggle with detecting money laundering compared to market abuse, with the FCA observing that "monitoring transactions in isolation does not regularly identify suspicious activity, as transactions may not appear unusual or suspicious on their own."
![]() |
Customer KYC information
|
||
![]() |
Proactive intelligence-led analysis
|
||
![]() |
Hidden or linked relationships
|
||
![]() |
Changes in ultimate beneficial ownership
|
||
![]() |
Other contextual information
|
For financial institutions operating in capital markets, this means developing more sophisticated monitoring systems that can connect disparate data points and provide a holistic view of transaction patterns.
According to the Bank of England's November 2024 survey on artificial intelligence in UK financial services, 75% of financial firms are already using AI, with another 10% planning to implement AI solutions over the next three years. This represents a significant increase from 58% in 2022.
However, the survey also highlights concerns. Of the firms using AI, 46% reported having only a 'partial understanding' of the technologies they use, while third-party implementations have increased from 17% in 2022 to 33% today.
This increasing reliance on external AI solutions, combined with limited internal understanding, could create new vulnerabilities if not properly managed.
Both reports emphasise the importance of strong governance frameworks. The FCA expects firms to have "robust systems and controls at each stage of the customer and transaction journey" with appropriate oversight, resourcing, training, and documentation.
For AI implementations specifically, the Bank of England survey found that 84% of firms reported having an accountable person for their AI framework, with 72% allocating accountability to executive leadership. However, accountability is often split, with most firms reporting three or more accountable persons or bodies.
This distributed accountability model requires clear communication channels and well-defined responsibilities to ensure effective risk management and regulatory compliance.
At LexisNexis® Risk Solutions, we recognise that effective financial crime prevention requires a combination of comprehensive data, advanced analytics, and deep domain expertise. As regulatory expectations continue to evolve, we remain committed to providing financial institutions with the tools and insights needed to navigate this complex landscape.
The focus on both technological innovation and foundational financial crime controls in these recent regulatory publications sends a clear message: financial institutions must continue to enhance their approach to risk management, leveraging new technologies while maintaining strong governance frameworks and human expertise.