UK Financial Watchdog Restricts Six Private Credit Lenders Over Anti-Money Laundering Concerns

LONDON: Britain’s Financial Conduct Authority (FCA) said on Friday it has placed restrictions on six private credit lenders over concerns about their anti-money laundering (AML) controls. The restrictions limit the firms’ ability to take on new customers and enter into new lending arrangements.

The six firms are Kingscrown Finance, MOMSB, Momentus Capital, Grosvenor Funding, Grosvenor Funding (North West) and Abbital. All are unregulated lenders known as Annex 1 firms. Such firms must register with the FCA for supervision under the Money Laundering Regulations but fall outside the regulator’s wider authorisation regime.

The regulator said it identified weaknesses in the firms’ AML policies, controls and procedures while assessing their registration applications. The restrictions were imposed at each firm’s own request. With limited exceptions, they prevent the lenders from onboarding new customers or doing new business with existing ones, including extending existing credit. They also restrict when the firms may accept payments from existing customers, and each firm must commission an independent review of its anti-money laundering framework. Property lender Kingscrown Finance had already been operating under voluntary restrictions since April.

The FCA said the action is part of its enhanced oversight of Annex 1 firms, which operate in sectors that can carry a higher risk of money laundering and other financial crime. Steve Smart, the FCA’s executive director for fighting financial crime, said the regulator had warned such firms they would face increased scrutiny and that they must show they can manage the money laundering risks they face. The watchdog also stressed that registration under the Money Laundering Regulations does not replace a counterparty’s own due diligence.

Scrutiny of the sector has intensified this year. In March, the FCA opened an enforcement investigation into Market Financial Solutions (MFS), a specialist lender that collapsed and that had been supervised by the regulator only for money laundering compliance as an Annex 1 firm. The FCA has since raised wider concerns about financial crime risks among unregulated lenders and other Annex 1 businesses, including an over-reliance on the financial crime controls of parent companies.

Fighting financial crime is one of the FCA’s stated strategic priorities.