Nearly three in ten alternative asset managers included in the Financial Conduct Authority’s review do not have a formal system for monitoring transactions, according to findings published by the UK regulator on Wednesday. The Financial Conduct Authority (FCA) surveyed 242 firms and received responses from 87% of the sample.
The results form a new foundation FM intelligence analysis of financial crime controls Across the Alternative Asset Management sector. The data indicates gaps in customer risk assessment, ongoing monitoring and management oversight.
Private markets carry higher exposure to PEP
Of the companies that responded to the FCA, 29% reported that they did not have a formal system for monitoring transactions. Another 18% lacked a documented methodology for assessing customer risks, while the same percentage did not conduct any formal anti-money laundering quality assurance.
The review also found that 10% of companies did not verify the source of customer wealth. Seven percent did not conduct any systematic monitoring after joining, and 7% did not repeat client screening.
Exposure to financial crime varies across business models. Politically exposed persons appeared in the client bases of 32% of private market firms, compared to about 9% of firms operating outside private markets. Reported exposure was therefore 3.6 times more frequent, although the FCA did not disclose the number of participants in either subgroup.
Complex ownership structures were also more common in private markets. About a fifth of companies in this sector said that more than 30% of their clients use such structures. Outside of private markets, 85% reported no clients with complex ownership.
Outsourcing creates an oversight gap
About 40% of companies have outsourced part of their compliance processes. However, only 36% of that group retained full oversight of the anti-money laundering process, according to the regulator.
FCA data describes weaknesses in systems and governance, not confirmed cases of money laundering or other financial crime. It also only provides a single cross-sectional view, preventing reliable predictions of how control gaps will change.
the Complete FM intelligence analysis Examines the findings, their limitations, and the mismatch between reported risk exposure and financial crime controls.
This article was written by Damian Schmil at www.financemagnates.com.
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