Financial Crime and AML Compliance for Payment Firms and Banks

Introduction - Financial Crime and AML Compliance for Payment Firms and Banks

Financial crime is the FCA's top enforcement priority, accounting for 74% of investigations in 2024/25. For payment institutions, EMIs, and banks, inadequate controls lead directly to business restrictions, licence suspensions, or revocation.

The consequences are immediate and material. Voluntary Requirements restrict customer onboarding and transaction processing. Section 166 skilled person reviews cost hundreds of thousands whilst disrupting operations. Enforcement action damages reputation, impacts banking relationships, and affects investor confidence. In severe cases, the FCA revokes licences.

What the FCA Expects

The Financial Crime Guide (updated November 2024) consolidates regulatory expectations. Your business-wide risk assessment must analyse firm-specific vulnerabilities. Generic templates are inadequate. Transaction monitoring must be calibrated to detect your actual risks through rule thresholds based on customer risk profiles, regular tuning and testing, and documented rationale for thresholds and rules.

Sanctions screening must be comprehensive against UK, US, EU, and UN sanctions lists, covering customers, beneficial owners, and payment counterparties. Every alert requires investigation with documented decisions. Customer due diligence must include standard verification for all customers and enhanced due diligence for politically exposed persons, high-risk jurisdictions, and complex beneficial ownership structures.

Your MLRO requires appropriate seniority, authority, and direct board access. Management information must demonstrate control effectiveness, identify emerging risks, and track remediation progress. Suspicious activity reports to the NCA must provide clear explanations enabling law enforcement action.

Sector-Specific Vulnerabilities

Payment institutions and EMIs face heightened scrutiny. Transaction speed limits intervention time once payments initiate. Cross-border operations require understanding multiple jurisdictions' sanctions regimes and money laundering typologies. Serving customers declined by banks increases inherent risk. Rapid growth strains compliance infrastructure. Third-party reliance through outsourced onboarding and monitoring creates oversight challenges.

APP fraud represents both consumer harm and financial crime risk. As receiving firms, you must prevent mule account recruitment through enhanced onboarding and detect mule activity through transaction monitoring calibrated for rapid in/out movements, structured amounts, and multiple small credits followed by large withdrawals.

Banks face distinct pressures. Correspondent banking exposes you to indirect customer money laundering and sanctions evasion. Trade finance remains vulnerable to trade-based money laundering through over/under-invoicing. Private banking serves high-net-worth clients, politically exposed persons, and complex offshore structures requiring enhanced scrutiny.

Common Control Failures

Recent Dear CEO letters and enforcement actions reveal recurring weaknesses. Risk assessments use generic templates rather than analysing firm-specific vulnerabilities. Transaction monitoring operates on vendor default settings, generating excessive false positive rates that overwhelm analysts whilst missing genuine risks. Sanctions screening omits beneficial owners or counterparties, with alerts auto-cleared without investigation. Financial crime teams are understaffed for business size and complexity, creating backlogs that prevent effective monitoring.

When the FCA identifies these failures, action follows rapidly. Voluntary Requirements restrict business until remediation is complete. Skilled person reviews assess frameworks independently. Enforcement action includes financial penalties, public censure, and in severe cases, licence restrictions or revocations.

How Buckingham Capital Consulting Helps

Since 2013, we've specialised in helping payment institutions, EMIs, and banks build financial crime frameworks that satisfy regulators whilst remaining proportionate to business models and resources.

We start with comprehensive gap analysis, assessing your current controls against FCA Financial Crime Guide expectations and Dear CEO letter findings. You receive specific identification of weaknesses, prioritised remediation actions based on risk and regulatory urgency, and a clear roadmap with timelines and resource requirements. We don't provide generic recommendations. We tell you exactly what needs fixing, why it matters, and how to fix it.

For business-wide risk assessments, we help you build genuine, firm-specific analysis. This means customer base analysis identifying higher-risk segments, product and service risk profiling, geographic exposure assessment including sanctions considerations, and business model threat assessment. Your risk assessment becomes the foundation driving control design and resource allocation.

Transaction monitoring is where most firms struggle. If your system generates thousands of alerts overwhelming your compliance team, we fix it through evaluation of current systems and rule effectiveness, calibration of thresholds to firm-specific risks and customer populations, implementation of testing protocols, and comprehensive documentation. Many firms achieve 60-80% reductions in false positive rates whilst improving detection effectiveness through proper calibration.

Sanctions compliance demands rigour. We ensure comprehensive screening coverage across customers, beneficial owners, payment counterparties, and trade finance participants against OFSI, OFAC, EU, and UN sanctions lists. We implement rigorous alert investigation procedures with documented decision-making, establish quality assurance processes, and provide regular testing with results reported to senior management.

Customer due diligence procedures must meet regulatory expectations without creating excessive friction. We build standard protocols for identity and address verification, enhanced due diligence frameworks for politically exposed persons and high-risk jurisdictions, source of funds and wealth verification procedures, and ongoing monitoring calibrated to customer risk ratings.

Many firms struggle to find or retain qualified MLROs with appropriate expertise. We provide interim MLRO services during regulatory leaves, recruitment gaps, or business transitions. We offer outsourced MLRO services for smaller firms where full-time MLRO is disproportionate. We provide advisory support to existing MLROs on complex matters, regulatory interpretation, or remediation programmes.

Regular independent reviews identify control weaknesses before regulators do. We conduct independent assessments of financial crime frameworks, transaction monitoring effectiveness testing, sanctions screening audits, and customer due diligence file reviews. Our reports provide clear findings, root cause analysis, and prioritised remediation recommendations.

When weaknesses are identified through internal reviews, regulatory findings, or skilled person reports, we manage remediation programmes. This includes programme management coordinating across risk, compliance, technology, and business functions, detailed project plans with milestones and accountability, stakeholder management including board and regulatory engagement, and quality assurance ensuring remediation is effective and sustainable. We've successfully managed remediation programmes for firms subject to Voluntary Requirements, delivering outcomes that satisfied the FCA and enabled business restrictions to be lifted.

When the FCA raises concerns, your response determines outcomes. We help you prepare responses to FCA correspondence demonstrating understanding and credible remediation plans, prepare for supervisory meetings, and provide ongoing liaison managing regulatory expectations throughout remediation programmes.

Why Financial Crime Cannot Wait

The FCA has made its position unambiguous: financial crime control failures will not be tolerated. The cost of getting this wrong extends beyond regulatory penalties. Business restrictions preventing customer onboarding or limiting transaction volumes directly impact revenue. Licence suspensions or revocations end businesses. Reputational damage affects customer confidence, banking relationships, and investor sentiment.

The cost of getting it right is manageable and proportionate. Robust financial crime controls, properly calibrated to your business model and risk profile, protect your business from criminal exploitation, satisfy regulatory expectations, and support sustainable growth.

Contact Buckingham Capital Consulting to discuss your financial crime framework. With over 14 years of specialist expertise helping payment institutions, EMIs, and banks build effective controls, we deliver solutions that satisfy regulators whilst remaining proportionate to your business.

Email us at info@buckinghamcapitalconsulting.co.uk or call 0207 866 2512