The FCA focused on wholesale brokers in its review because of the important role they play in capital markets in facilitating deals.

The regulator also engaged with other market participants to understand wider risks, issues and good practice, recognising that collaboration with and across industry is essential to delivering real improvements. This report will assist any regulated businesses involved in the capital markets to improve their controls and prevent financial crime.

Good progress has been made since the FCA’s Thematic Review in 2019, including with customer risk assessments, onboarding processes, governance and supervision and collaboration between trade surveillance and transaction monitoring teams.

However, the FCA identified areas where brokers needed to improve to better protect against money laundering, including:

- an underestimation of the risks of money laundering firms are exposed to
- over-reliance on others in the transaction chain completing appropriate due diligence checks on customers
- limited information sharing between firms
- insufficient awareness of the money laundering through the markets suspicious activity reports glossary code

It is the second of these that interests us as Nigel Morris-Cotterill has argued for 30 years that reliance on other regulated businesses to have conducted effective KYC is not good practice, even though for a while it was approved by the FATF.