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The UK’s Financial Conduct Authority is turning up the heat on Annex 1 firms. Unregulated lenders, safe custody providers, money brokers, and financial leasing companies are all in the crosshairs — and the regulator isn’t being subtle about it.
Annex 1 firms sit in a peculiar space. They’re not fully regulated in the traditional sense, but they’re still required to register with the FCA for anti-money laundering purposes. That registration requirement exists precisely because these firms touch enough of the financial system to create real exposure. And right now, the FCA thinks too many of them are taking that obligation far too lightly.
The core problem, per the FCA, is dependency. Firms have been leaning on their parent companies’ financial crime controls rather than building their own. The regulator’s position is pretty clear: that’s not good enough. Each firm needs to independently assess whether its controls actually match its own specific risks, its own governance structure, its own day-to-day operations. A policy document copied from a group-level compliance team somewhere upstream doesn’t cut it. Off-the-shelf procedures from a different company — even a related one — are deemed insufficient by the FCA outright.
900 Firms Now Under the Microscope
The FCA has sent an information request to roughly 900 Annex 1 firms. That’s a big number. The goal is to get a detailed picture of what these firms actually do — their activities, their business models, and the specific risks they carry. It’s not a routine check. The regulator wants intelligence it can use to identify where financial crime risks are most concentrated across the sector.
Worth noting: the FCA didn’t start from zero here. Earlier work with around 300 firms in late 2025 laid the groundwork. The current outreach to 900 firms builds on that, scaling up the data collection significantly. The FCA seems to want a comprehensive map of the sector before deciding where to push harder.
And the registration process itself is changing. The FCA is placing greater scrutiny on new applications from Annex 1 firms, and it’s warned explicitly that the process may become more time-consuming as a result. Firms that haven’t registered yet are being urged to apply immediately. Those operating without registration are basically running a compliance risk that’s hard to justify at this point.
Unregulated Lending and Complex Structures
One specific area the FCA called out: unregulated lending through complex structures like special purpose vehicles. These arrangements can obscure who’s actually taking on risk and who’s responsible for what controls. The FCA sees real consumer and market harm potential there, and it’s not shy about saying so.
That kind of structural complexity is part of why generic, inherited compliance frameworks don’t work. A special purpose vehicle set up for a specific lending transaction has a very different risk profile than a large financial group’s main operating entity. Treating them the same is probably how you end up with gaps that bad actors can exploit.
The broader AML landscape across financial services has been shifting for years. Regulators globally have pushed firms to move away from tick-box compliance toward something more genuinely risk-based. The FCA’s stance on Annex 1 firms fits squarely into that trend — but the sector has apparently been slow to catch up.
What Regulated Firms Need to Do Now
The FCA isn’t only talking to Annex 1 firms directly. It’s also reminding fully regulated entities — banks, brokers, and others — that they have their own obligations when dealing with Annex 1 counterparties. Due diligence is the watchword. Regulated firms need to understand the business practices of Annex 1 firms they work with, and they need to verify registration status before doing business.
That’s a meaningful ask. It puts compliance pressure not just on the Annex 1 firms themselves but on anyone in the financial system that touches them. A bank that routes business through an unregistered money broker can’t just shrug and say it didn’t know. The FCA’s message is that knowing is the job.
No further details have come out about specific investigations or enforcement actions already underway. The FCA didn’t disclose whether any firms have already been flagged for serious concerns based on the earlier work with 300 firms. Unclear whether the 900-firm outreach will lead to a wave of enforcement or mostly result in supervisory guidance. Probably both, depending on what the data shows.
What’s clear is that the FCA isn’t treating Annex 1 oversight as a side project anymore. The scale of the outreach — 900 firms — and the explicit warnings about slower registration processes both point to a regulator that’s decided this sector needs sustained, structured attention rather than periodic spot checks.
Firms that have been relying on group-level procedures to satisfy their AML obligations should probably start asking hard questions internally. The FCA has been direct: bespoke controls, tailored to each firm’s specific operations and risks, are the standard. Anything short of that is a problem waiting to surface.
The intelligence gathered from the 900-firm request will be used, per the FCA, to identify and disrupt financial crime risks across the sector. That’s an active framing — disrupt, not just monitor.
Frequently Asked Questions
What types of firms are classified as Annex 1 firms by the FCA?
Annex 1 firms include unregulated lenders, safe custody providers, money brokers, and financial leasing companies — all of which must register with the FCA for anti-money laundering purposes.
How many Annex 1 firms did the FCA contact in its latest outreach?
The FCA sent information requests to approximately 900 Annex 1 firms, building on earlier engagement with around 300 firms in late 2025.
