More than a quarter of principal corporate finance firms do not carry out financial crime risk tests of their appointed representatives, leaving them at greater risk of money laundering.  

The Financial Conduct Authority finds that a survey of 270 corporates revealed that 29% of principal firms said they did not conduct financial crime risk assessments on their appointed representatives. 

It adds that 11% of firms reported having no documented business-wide risk assessment, “which is a requirement under the money laundering regulations”. 

The regulator points out: “Corporate finance firms help businesses raise money by connecting them with investors or lenders and are vital to the growth and success of the UK economy — making effective financial crime controls essential.”

“Without a business-wide risk assessment, firms are leaving themselves and the wider market vulnerable to money laundering, fraud and other forms of financial crime.” 

Its survey also finds that 6% of principal firms reported not monitoring their appointed representatives’ compliance with financial crime regulations or conducting on-site visits or audits. 

Financial Conduct Authority director of the specialist directorate Andrea Bowe says: “Corporate finance firms play a vital role in the UK’s capital markets. Their exposure to money laundering risks means it is essential that they have strong, proactive controls in place.

“While some firms may be meeting expectations, many may be falling short of minimum regulatory requirements. 

“We are sharing our findings so firms can address any gaps in their control frameworks. We are also writing to potentially non-compliant firms to set out improvements they need to make.” 

However, the watchdog says that it found examples of good practice. 

This included evidence of firms regularly updating their business-wide assessments to reflect emerging risks and using detailed management information to strengthen financial crime controls.  

It adds that 97% of firms said they regularly report financial crime concerns to senior management.