Banks face a growing challenge as regulators shift their focus from technical compliance to demonstrable effectiveness in combating financial crime. From the FCA and FinCEN to FATF, supervisors increasingly want evidence that controls are disrupting illic
As politicians and policymakers in
several jurisdictions continue to discuss regulatory simplification and
reducing compliance burdens, financial crime supervision is moving in the
opposite direction.
Around the world, regulators are
demanding more from banks, not less. The emphasis is no longer on whether
institutions have anti-money laundering, sanctions, and fraud controls in
place. Increasingly, the question is whether those controls actually work.
This shift is particularly evident in
the United Kingdom. The Financial Conduct Authority has repeatedly identified
fighting financial crime as a strategic priority and continues to intensify its
scrutiny of banks' anti-money laundering, sanctions, and fraud controls.
Industry analysis of the FCA's 2026
priorities notes that combating financial crime remains a core focus, with
firms expected to demonstrate robust governance, effective controls, and
meaningful risk management outcomes.
Speaking at the FCA's recent
financial crime conference, chief executive Nikhil Rathi stressed the
importance of collective action, stating that "we need a system-wide
response to financial crime."
The FCA has also worked alongside the
National Crime Agency to identify priority economic crime threats, including
money laundering, fraud, and high-risk jurisdictions.
The United States is moving in a
similar direction. In April, FinCEN unveiled what it described as a proposal to
"fundamentally reform" anti-money laundering and counter-terrorist
financing program requirements.
The proposed framework seeks to
redirect attention away from procedural box-ticking and toward measurable
outcomes that help law enforcement identify and disrupt illicit finance.
The proposals would require
institutions to adopt genuinely risk-based programs, focusing resources on
higher-risk customers, products, and activities rather than applying uniform
controls across entire customer populations.
Banking regulators supporting the
initiative have emphasized that AML programs should direct greater attention to
areas presenting the highest risk rather than expending resources on low-risk
activity.
This change reflects a broader
international trend led by the Financial Action Task Force. FATF evaluations
increasingly assess not only technical compliance with its recommendations but
also the effectiveness of national and institutional financial crime controls.
Countries are judged against a series
of "Immediate Outcomes" designed to measure whether anti-money
laundering and counter-terrorist financing systems are achieving meaningful
results.
For banks operating in higher-risk
jurisdictions, the implications are significant. Weak national ratings can
trigger enhanced due diligence expectations, higher compliance costs, increased
correspondent banking scrutiny, and reputational concerns.
