This Policy Brief examines how the FCA should work with its regulated populations to be more data-driven, innovative and apply risk-based supervision.
In recent years, the UK Financial Conduct Authority (FCA) has committed to delivering enhanced anti-money laundering (AML) supervision ‘through greater use of intelligence and data’. This commitment has been made against the backdrop of a regulated environment that is rapidly transforming due to shifting market conditions and new regulations such as the EU’s 2018 Payment Services Directive II which promotes the development and adoption of new financial services and products. While innovation positively impacts the financial industry, it is making it easier for criminals to bypass the traditional financial system, transferring dirty money from legitimate-looking entities to criminals. Thus, financial technology firms (FinTechs) and ‘challenger’ banks have been a focus of the FCA, as evidenced by its review of the financial crime controls in challenger banks published in April 2022.