FCA sets out AML control gaps at asset managers and alternatives firms after reviewing 242 firms
The FCA has published good and poor practice findings from a review of 242 firms, with named gaps that double as a self-assessment checklist for compliance leads at asset managers and alternatives firms.
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Verdict: Worth reviewing — and acting on if any of the gaps below describe your firm.
The FCA has published good and poor practice findings from its 2025/26 review of financial crime controls across the asset management and alternatives sector. The regulator issued a questionnaire to 242 firms and conducted follow-up interviews with a subset. The sector is large: around 2,500 firms in total, with approximately 2,100 subject to the annual financial crime return (REP-CRIM). The findings cover the full range of controls, from risk assessment to governance.
Just over a fifth of firms either had no business-wide risk assessment (BWRA) or had one that was incomplete. A BWRA is the document that maps your firm's exposure to money laundering and terrorist financing risk, and it is a legal requirement under Regulations 18 and 18A of the Money Laundering Regulations 2017. Among firms active in private markets, 18% said their BWRA did not specifically cover private markets risks at all.
Transaction monitoring is another gap. 29% of firms reported having no formal transaction monitoring process, which the FCA notes is a mandatory requirement under Regulation 28(11) of the MLRs. A further 18% had no formal customer risk assessment (CRA) methodology, meaning they may be unable to comply with due diligence requirements under Regulations 28(12) and 28(13). And 10% did not verify high-risk customers' source of wealth.
Outsourcing is a particular concern. Around 40% of firms outsource some part of their financial crime compliance function, yet only 36% of those firms had full oversight of the third party's anti-money laundering onboarding processes. The FCA states that outsourcing the function does not transfer the firm's regulatory obligation.
Only just over a third of firms discuss AML risk regularly at governance forums, despite nearly all collecting management information. Separately, half reported no investment in remediation or system uplift of AML controls in the last 24 months.
More than a quarter of larger firms, those with over £10bn in AUM, had a money laundering reporting officer (MLRO) who was part-time or had shared responsibilities. The FCA notes these firms are likely to have a wider customer base and potentially more complex activities.
Private markets firms face a higher inherent risk profile: 32% reported politically exposed persons (PEPs) in their customer base, compared with 9% for non-private markets firms, and around a fifth said over 30% of their customers use complex ownership structures. The overseas exposure is sector-wide: half of all firms reported that over 60% of their customer base is domiciled overseas.
On the positive side, 84% of firms reviewed or audited internal suspicious activity report (SAR) submissions to check quality, which the FCA flagged as good practice.
The FCA has said it will use the questionnaire data in ongoing supervision of the sector and will intervene where firms fall short, in line with its 2025-30 strategy objective to fight financial crime.
Firms in this sector can use the findings as a self-assessment prompt. The BWRA, transaction monitoring, and outsourcing oversight points each carry explicit legal obligations under the MLRs.
