FCA raises money laundering concerns over unregulated lenders

The FCA has raised concerns about a number of risks among unregulated lenders, safe custody providers, money brokers and financial leasing companies (Annex 1 firms).

The regulator says it has seen a number of risks among Annex 1 firms, in particular the potential for them to facilitate financial crime.

These firms need to be registered with the FCA for anti-money laundering purposes and the FCA is urging all firms carrying out these activities without being registered to submit an application for registration.

In a statement, the FCA said: "We have seen firms rely too heavily on the financial crime controls of their parent company. Each individual firm within a group must assess whether these controls are appropriate for their financial crime risks, governance and operations. They also can’t rely on off-the-shelf procedures designed for a different company. Each must have controls tailored to the way they operate and the risks they need to manage."

It added that regulated firms should "do their due diligence and understand the business of firms they are dealing with – including seeking direct confirmation of their registration status".

The FCA is also concerned about the risks to consumers and markets from unregulated lending conducted through complex structures, including special purpose vehicles.  

To address these risks, the FCA says it is "closely scrutinising applications to register as an Annex 1 firm".  

"Firms need to clearly demonstrate that they can comply with the money laundering regulations", it noted, and should expect registration applications to take longer.

In addition, the regulator has sent an information request to around 900 Annex 1 firms "to improve our understanding of their activities, business models and risks". This follows on from the work carried out with 300 Annex 1 firms in late 2025 and means the FCA has now contacted all registered Annex 1 firms. 

"We will use this and other intelligence to identify and disrupt financial crime risks in this sector", the FCA concluded.