FCA restricts six Annex 1 lenders over AML control failures as scrutiny intensifies
Six unregulated consumer lenders have been handed voluntary business restrictions after the FCA found material weaknesses in their AML controls. If you are an Annex 1 firm, read this now.
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Action required for Annex 1 firms. Worth reviewing for regulated firms dealing with them.
The FCA has imposed voluntary restrictions on six unregulated consumer lenders after identifying material weaknesses in their anti-money laundering (AML) policies, controls and procedures during registration assessment. The six firms are Kingscrown Finance Ltd, MOMSB Ltd, Momentus Capital Ltd, Grosvenor Funding Ltd, Grosvenor Funding (North West) Ltd, and Abbital Ltd.
The restrictions were imposed at each firm's own request and prevent them from taking on new customers or doing new business with existing customers, including extending existing credit. The conditions are not identical across all six. MOMSB Ltd, Momentus Capital Ltd, Grosvenor Funding Ltd, and Grosvenor Funding (North West) Ltd must each commission an independent review of their AML framework. Kingscrown Finance Ltd faces the toughest terms: initial restrictions imposed on 21 April 2026 were tightened on 25 September 2026 to limit how it may receive payments from existing customers and require an orderly wind-down of its loan book.
Annex 1 firms are unregulated lenders, safe custody providers, money brokers, and financial leasing companies required to register with the FCA for AML supervision. Registration is not the same as full FCA authorisation under FSMA: Annex 1 firms sit outside the full conduct and prudential rulebook and their customers have no access to the Financial Ombudsman Service.
The FCA has been building pressure on the Annex 1 population since early 2024. In March 2024 the FCA wrote to all Annex 1 firm CEOs after a thematic review, identifying common failings: financial crime controls that had not kept pace with business growth, absent business-wide risk assessments, discrepancies between registered and actual activities, and inadequate resourcing. The FCA published a further statement on 7 August 2026, concluding that sufficient progress had not been made. After contacting 300 firms in late 2025, the FCA has now sent an information request to approximately 900 registered Annex 1 firms to identify financial crime risks and determine where further action is needed.
Two recurring weaknesses are worth noting. First, firms relying on group-level financial crime controls rather than tailoring them to each entity's own risks. The FCA is clear: each firm within a group must assess whether group controls are appropriate for its specific operations. Second, complex lending structures including special purpose vehicles, which can obscure the true nature of lending activity and make financial crime risk harder to monitor and control.
Steve Smart, the FCA's executive director lead for fighting financial crime, said: "We have warned Annex 1 firms that they face increased scrutiny. They must demonstrate they can manage the money laundering risks they face. Where they cannot satisfy us, we will intervene."
The FCA has also reminded regulated firms that registration under the Money Laundering Regulations is not a substitute for their own due diligence when dealing with Annex 1 counterparties. That means seeking direct confirmation of registration status and conducting independent checks.
If you are an existing Annex 1 firm, the immediate focus should be your business-wide risk assessment and whether your firm-specific controls are adequate, particularly if you rely on group-level frameworks.
If you are applying for registration, expect longer determination times. Ensure your application demonstrates how you will meet AML requirements from day one.
