Annex 1 firms face tighter anti-money laundering scrutiny

The Financial Conduct Authority identified significant vulnerabilities among Annex 1 entities, including unregulated lenders, safe custody providers, money brokers, and financial leasing firms.

A primary concern is that these businesses often rely excessively on parent company financial crime frameworks or generic off-the-shelf procedures that fail to address their specific operational risks.

The regulator emphasized that every entity within a group must implement AML controls tailored directly to its own risk profile.

Additionally, complex financing arrangements and special purpose vehicles in unregulated lending present growing threats to consumers and market integrity.

Regulated counterparties must maintain strict due diligence when engaging with Annex 1 firms.

To mitigate these risks, the regulator is applying heightened scrutiny to all new Annex 1 registration applications, warning firms that processing times will increase as compliance capabilities are thoroughly vetted.

Alongside stricter entry standards, an information request has been dispatched to approximately 900 registered entities.

Following an initial review of 300 firms in late 2025, this survey ensures the FCA has surveyed all registered Annex 1 entities to build a comprehensive picture of their business models and disrupt potential financial crime across the sector.