An enforcement action by the UK Financial Conduct Authority (FCA) in 2017 revealed that a financial institution (FI) was used to move approximately USD10 billion cross border through mirror trades in securities. While all FIs are now aware of the mirror trading typology, how else are they addressing money laundering (ML) risks in capital markets?
In June 2019, the FCA published a report designed to assist firms in identifying and assessing the capital market ML risks they are exposed to.1 This was based on the FCA’s thematic review of ML challenges in capital markets transactions and is a topic that globally regulators are paying increased attention to, as evidenced by the recent wave of guidance papers issued.2
Here, we highlight three key areas in the report that have also been emphasized by other regulators, such as the Monetary Authority of Singapore, Hong Kong Securities and Futures Commission, or the USA Financial Industry Regulatory Authority. For each area, we have provided our observations on the issue based on our experience with clients in the capital markets sector and suggested actions to manage these risks.
At PwC, we understand the ML issues faced in capital markets are very specific to the business and complex. To address them requires strong industry and product knowledge as well as financial crime subject matter expertise. PwC's Financial Crime Unit has the right experience and capabilities to advise you as you navigate these capital markets ML challenges. Speak with us to find out how we can help your fight against financial crime.
1 UK Financial Conduct Authority (FCA) (2019, June). Understanding the money laundering risks in the capital markets. Retrieved from https://www.fca.org.uk/publications/thematic-reviews/tr19-4-understanding-money-laundering-risks-capital-markets.
2 USA Financial Industry Regulatory Authority (FINRA) (2019, October). 2019 report on examination findings and observations. Retrieved from https://www.finra.org/rules-guidance/guidance/reports/2019-report-exam-findings-and-observations/anti-money-laundering.; Monetary Authority of Singapore (MAS) (2019, January). Guidance to capital markets intermediaries on enhancing AML/CFT frameworks and controls. Retrieved from https://www.mas.gov.sg/regulation/guidance/guidance-to-cmi-on-enhancing-amlcft-frameworks-and-control.; Hong Kong Securities and Futures Commission (SFC) (2018, August). AML/CFT measures and controls inspection findings. Retrieved from https://www.sfc.hk/edistributionWeb/gateway/EN/circular/aml/doc?refNo=18EC64.; Financial Action Task Force (FATF) (2018, October). Risk-based approach guidance for the securities sector. Retrieved from https://www.fatf-gafi.org/publications/fatfrecommendations/documents/rba-securities-sector.html.