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The FCA is consulting on extending the scope of REP-CRIM, their annual financial crime reporting obligation. Under the proposed changes, a firm’s revenue is no longer taken into account, so some smaller firms would need to start submitting returns. For those who may soon be in scope, now is a good time to review your financial crime controls and consider whether your management information would stand up to scrutiny.
What is REP-CRIM?
The purpose of the REP-CRIM is to provide the FCA with insight into the potential financial crime risks faced by firms. The annual financial crime reporting obligation (REP-CRIM) was introduced in 2016 and requires firms to provide a range of aggregated information to the FCA. Current requirements are set out under Handbook SUP 16.23 and already apply to larger firms depending on their activities and money laundering risks.
Changes proposed by the REP-CRIM consultation
The FCA published CP20/17: Extension of Annual Financial Crime Reporting Obligations in August and are asking for comments by 23rd November.
The FCA has proposed the following additional firms would need to provide REP-CRIM information irrespective of their total annual revenue:
- All firms authorised under the Financial Services and Markets Act 2000 that are within the scope of the Money Laundering Regulations 2017 and that hold client money or carry on an activity that poses a higher money laundering risk
- All payment institutions except those that only provide money remittance or account information services and/or payment initiation services
- All electronic money institutions
- All multilateral trading facilities and organised trading facilities
- All crypto asset exchange providers and custodian wallet providers.
An opportunity to improve your financial crime framework
The information reported under the obligation is fundamental to a firm’s insight into the potential financial crime risks it faces. Firms not currently required to submit REP-CRIM returns may find identifying data, such as the firms “top three most prevalent frauds”, challenging. Systems and controls that identify and produce accessible data and management information will provide some firms with a head start if financial crime reporting is required.
Firms already reporting to the FCA have found, in our experience, that this doesn’t just have to be an exercise in completing the REP-CRIM submission. It is also an opportunity to enhance your financial crime management information, MLRO reports and governance arrangements.
Accuracy is key to financial crime reporting
Our work with firms already reporting under the existing regime has highlighted the importance of providing the FCA with correct data. Inaccuracies or discrepancies in reporting will bring increased scrutiny from the regulator when it comes to future submissions. Errors can also be seen as an indicator of deeper inadequacies in a firms systems and controls.
Get ahead when it comes to data gathering
We would also advise firms to look at the types of data already reported by larger firms and assess how easy it would be to provide any such data points. While the firms already caught were advised by the FCA to submit data on a “best endeavours basis” in year one, we would advise firms to get ahead on the sort of data points that will be required.
How Bovill can help
We have worked with a number of firms who are caught under the current regime to help both comply with the reporting requirements and the simplification of what can be a burdensome data gathering exercise.