The Financial Conduct Authority (FCA) has released a review of the sanctions systems and controls in place at UK financial firms, highlighting areas for improvement. The review focused on firms’ response to the expansion of sanctions following Russia’s invasion of Ukraine and examined over 90 firms across sectors including banking, insurance, and wealth management.
The review identified examples of good practice, such as effective policies and procedures, robust risk assessments, and regular reviews and monitoring. However, it also highlighted areas in need of improvement, including insufficient sanctions knowledge, inadequate record-keeping practices, and poor IT infrastructure and controls.
The FCA has called on firms to enhance their compliance measures to mitigate the risk of sanctions breaches. It emphasizes the importance of adapting to the evolving sanctions landscape and shifting risk profiles. The FCA has also stated that it is prepared to use its regulatory tools, such as imposing business restrictions and taking enforcement action, to address deficiencies in firms’ systems and controls.
Firms are advised to prioritize enhancing sanctions knowledge and understanding, improving record-keeping practices, and strengthening IT infrastructure and controls. In the current regulatory environment, it is crucial for financial services firms to actively manage their sanctions risks and comply with regulatory obligations.
By prioritizing compliance efforts, firms can contribute to overall market stability and prevent financial crime and sanctions violations. Continued vigilance and adaptation are necessary to ensure the integrity of the financial services industry.
