FCA Review Finds Financial Crime Control Gaps Across Asset Managers and Private Markets
The UK Financial Conduct Authority’s 22 July 2026 review of financial-crime controls across asset-management and alternatives firms found material gaps in risk assessment, customer due diligence, transaction monitoring and governance, with private-market firms facing some of the highest inherent risks.
The FCA engaged 242 firms during 2025/26, with 87% responding to its questionnaire. It said private-market firms were more exposed to complex ownership structures, politically exposed persons and cross-border activity than many other asset managers. Around one fifth of private-market firms said more than 30% of their customers used complex ownership structures, while 85% of non-private-market firms reported having no customers with such structures. PEPs were present in the customer base of 32% of private-market firms, compared with 9% of non-private-market firms.
Risk assessment and due diligence gaps
Just over one fifth of firms either had no business-wide risk assessment or had an incomplete one. Among private-market firms, 18% said their BWRA did not specifically address risks associated with private markets. The FCA also found that 18% of firms had no formal methodology for assessing customer risk.
Customer due diligence was frequently outsourced: around 40% of firms used third parties for CDD or enhanced due diligence. However, only 36% of firms that outsourced these activities said they had full oversight of the third party’s AML onboarding process. Separately, 10% of firms said they did not verify the source of wealth of high-risk customers.
Monitoring, screening and governance
The review identified significant weaknesses after onboarding. Twenty-nine per cent of firms had no formal transaction-monitoring framework, 7% had no systematic customer monitoring after onboarding, and another 7% did not repeat sanctions, PEP or adverse-media screening.
Governance was also uneven. More than half of money laundering reporting officers were part-time or shared across roles, and more than a quarter of firms managing over £10 billion in assets also had a part-time or shared MLRO. Only just over one third of firms discussed AML risk regularly at governance forums, while 36% discussed AML risk only annually or less frequently.
There were stronger practices in some areas. The FCA said 84% of firms reviewed or audited internal suspicious activity reports for quality, and 88% tracked and used financial-crime management information. Even so, half of firms reported no investment in AML remediation or system upgrades during the previous 24 months, while 18% had no formal quality-assurance process for AML onboarding, alerts or periodic reviews.
The FCA said the findings will inform its future supervision and interventions where firms fall short. The review is not an enforcement action against the 242 firms as a group, but it gives asset managers and private-market firms a clear indication of the control areas the regulator considers most important.
For compliance teams, the message is particularly relevant to private markets: complex ownership, international fund flows and high-risk customers increase the need for documented risk assessment, effective oversight of outsourced CDD, ongoing monitoring and governance that goes beyond annual AML reporting.
