Financial crime risks in UK markets: Regulatory Insights for 2025

Discover key insights from the FCA and Bank of England on financial crime prevention, helping UK institutions navigate evolving risks and regulatory scrutiny.
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Navigating evolving financial crime risks in UK markets

Recent regulatory publications from the Financial Conduct Authority and Bank of England provide critical insights into the evolving landscape of financial crime prevention in UK markets.


As financial institutions face increasing scrutiny and complex threats, understanding the current regulatory perspective is essential for effective risk management.


The persistent challenge of money laundering through markets

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 report identifies several persistent obstacles:

  • Limited visibility of entire transaction chains.
  • High transaction volumes overwhelming manual monitoring capabilities.
  • Difficulty in identifying suspicious activity due to the complexity of market transactions.
  • Low levels of tailored transaction monitoring tools specific to 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.

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Regulatory expectations for enhanced transaction monitoring

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."

The regulator emphasises the need for an integrated approach that considers:

 
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.


The role of technology and AI in addressing financial crime risks

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.

For financial crime prevention specifically, the survey reveals encouraging trends:

  • Anti-money laundering and fraud prevention is ranked among the top three areas where firms perceive the greatest current benefit from AI
  • The use of AI in regulatory compliance and reporting is expected to grow significantly over the next three years
  • Cybersecurity, another key aspect of financial crime prevention, ranks highly for current AI applications

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.


Governance and risk management imperatives

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.

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Best practices for financial institutions in 2025

Based on these regulatory insights, financial institutions should consider the following approaches:

Tick

Enhance risk assessment processes

Ensure business-wide risk assessments adequately reflect MLTM risks specific to your business model and customer base.

Integrate monitoring systems

Break down silos between trade surveillance, transaction monitoring, and KYC processes to create a more holistic view of customer activity.

Leverage advanced technology thoughtfully

Consider how AI and machine learning can enhance detection capabilities while maintaining appropriate human oversight and understanding.

Improve information sharing

Utilise the expanded information sharing powers under the Economic Crime and Corporate Transparency Act 2023 to collaborate more effectively in countering money laundering.

Invest in specialised training

Develop tailored training programs focused on MLTM red flags specific to capital markets.

Looking forward...

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.

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