FCA Finds Nearly One in Three Firms Has No Transaction Monitoring

Nearly three in ten alternative asset managers covered by a Financial Conduct Authority review have no formal transaction monitoring system, according to findings published by the UK regulator on Wednesday. The FCA surveyed 242 firms and received responses from 87% of the sample.

The results form the basis of a new FM Intelligence analysis of financial crime controls across the alternative asset management sector. The data points to gaps in customer risk assessment, ongoing monitoring and management oversight.

Private Markets Carry Higher PEP Exposure

Among the firms responding to the FCA, 29% reported having no formal transaction monitoring system. Another 18% lacked a documented customer risk assessment methodology, while the same percentage conducted no formal anti-money laundering quality assurance.

The review also found that 10% of firms did not verify customers' source of wealth. Seven percent conducted no systematic monitoring after onboarding, and another 7% did not repeat customer screening.

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Financial crime exposure differed across business models. Politically exposed persons appeared in the customer bases of 32% of private-market firms, compared with 9% of firms operating outside private markets. The reported exposure was therefore 3.6 times more frequent, although the FCA did not disclose the number of respondents in either subgroup.

Complex ownership structures were also more common in private markets. Around one-fifth of firms in this segment said that more than 30% of their customers used such structures. Outside private markets, 85% reported having no customers with complex ownership.

Outsourcing Creates an Oversight Gap

Around 40% of firms outsourced part of their compliance operations. However, only 36% of that group retained full oversight of AML onboarding, according to the regulator.

The FCA data describes weaknesses in systems and governance, not confirmed cases of money laundering or other financial crime. It also provides only a single cross-sectional view, preventing reliable projections of how the control gaps may change.

The full FM Intelligence analysis examines the findings, their limitations and the mismatch between reported risk exposure and financial crime controls.