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The FCA has issued a supervisory questionnaire (a section 165 request) to asset management and alternatives firms on Anti-Money Laundering, Counter-Terrorist Financing and Counter-Proliferation Financing. Firms are being given under two months to complete the questionnaire.
This initiative is part of the FCA’s ongoing drive toward proactive financial crime supervision and reflects its broader scrutiny of financial crime risk management frameworks.
The regulator will use the data to benchmark the maturity of firms’ financial crime frameworks, identify sector-wide vulnerabilities, and assess whether systems and controls meet the standards expected under the Money Laundering Regulations 2017 (MLRs).
In the covering note FCA have commented that in phase two of this review they will select firms for a more extensive review which will include an interview with firms’ MLROs. It is therefore important that firms are able to respond to the questionnaire in a robust manner.
What the FCA is asking
The supervisory questionnaire goes far beyond previous data collection exercises. It requires firms to provide detailed information covering three key areas:
Business model and client base – including private market exposure, client / investor types, and use of complex structures for investors and investments.
Inherent financial crime risks – such as jurisdictional exposure, high-risk clients, and offshore ownership.
Systems and controls – including governance arrangements, transaction monitoring, sanctions screening, and ongoing due diligence.
What this means for firms
This data gathering exercise underscores the FCA’s intent to test the operational reality of financial crime frameworks within asset managers and alternative investment firms.
Inconsistencies between a firm’s business model, its risk profile, and the controls described in its submission are likely to trigger follow-up or targeted supervisory engagement.
When the FCA follows-up, firms should be ready to supply policies, minutes of board and relevant committee meetings, MI dashboards, training records, testing results, and examples of escalation and remediation.
Common challenges and pitfalls
There are several recurring challenges in completing the questionnaire:
- In places the questionnaire uses definitions that will require careful consideration;
- Data required may be held in multiple places – especially for firms relying on disparate systems or third-party providers; and
- There is a presumption that firms will have an up to date business wide risk assessment (BWRA); where this is not the case completing the questionnaire will be more difficult and is likely to lead to further scrutiny
How we can help
Our regulatory specialists can support firms through:
- Questionnaire interpretation, assistance with completion and review.
- Gap analysis – benchmarking financial crime frameworks against FCA expectations and the MLRs.
- Policy and risk assessment updates – refining BWRA, client and investment risk assessments, and control documentation.
- Governance and training – preparing MLROs and senior managers for supervisory engagement.
For guidance on completing the FCA supervisory questionnaire or enhancing your firm’s financial crime framework, please contact us.
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