The Financial Conduct Authority published a supervisory reminder that regulated firms must undertake proper checks when dealing with unregulated lenders, safe custody providers, money brokers and financial leasing companies registered with the FCA solely for anti-money laundering (AML) purposes, known as “Annex 1” firms. Around 1,200 Annex 1 firms are registered under this AML-only regime, and the FCA’s powers are limited to assessing compliance with AML obligations rather than applying its wider rulebook. The FCA noted that this registration regime differs from authorisation under the Financial Services and Markets Act, including that wider conduct rules do not apply and customers of Annex 1 firms cannot access the Financial Ombudsman Service. Regulated firms are expected to conduct due diligence consistent with legislative requirements, including confirming registration status directly with the Annex 1 firm, independently checking information provided, and identifying and managing relevant risks, including those set out in the 2025 National Risk Assessment. The FCA referenced earlier engagement on standards, including a 2024 letter to CEOs raising concerns about AML controls and follow-up work that included contacting 300 firms in late 2025. It also flagged cases where consumers were encouraged to set up limited companies to access lending such as unregulated bridging finance from Annex 1 firms, and reiterated that these consumers will not have access to the Financial Ombudsman Service if problems arise.

Original source View in tracker