The FCA is intensifying scrutiny of Annex 1 firms and has contacted around 900 businesses
Annex 1 firms are facing increased scrutiny from the Financial Conduct Authority (FCA) after the regulator identified a number of risks linked to unregulated lenders, safe custody providers, money brokers and financial leasing companies.
The FCA said on 7 August 2026 that it is particularly concerned about the potential for these businesses to facilitate financial crime. Firms carrying out Annex 1 activities must be registered with the FCA for anti-money laundering purposes, and businesses operating without the required registration have been told to submit an application.
The regulator said it has identified concerns about how some Annex 1 firms manage financial crime controls. In particular, the FCA has seen firms rely too heavily on controls operated by a parent company.
According to the regulator, each individual firm within a group must assess whether its financial crime controls are suitable for its own risks, governance and operations. Firms also cannot simply rely on standard procedures created for another company.
Instead, the FCA said controls must be tailored to the way each business operates and to the risks it needs to manage.
The regulator also raised concerns about risks to consumers and markets arising from unregulated lending. The FCA said such lending can involve complex structures, including special purpose vehicles.
The latest action follows an earlier FCA warning to regulated firms about the risks of dealing with Annex 1 businesses. The regulator has advised regulated firms to continue carrying out due diligence on the businesses they deal with and to understand their activities.
This includes seeking direct confirmation of an Annex 1 firm’s registration status.
The FCA has now said it is closely scrutinising applications from businesses seeking registration as Annex 1 firms. Applicants must clearly demonstrate that they can comply with the money laundering regulations.
The regulator warned that firms should expect registration applications to take longer as a result of the increased scrutiny.
The FCA is also expanding its information-gathering work across the sector. It has sent an information request to around 900 Annex 1 firms to improve its understanding of their activities, business models and associated risks.
The latest information-gathering exercise follows work carried out with 300 Annex 1 firms in late 2025. The FCA said the latest exercise means it will have contacted all registered Annex 1 firms.
The regulator said it will use information obtained through this work, alongside other intelligence, to identify and disrupt financial crime risks in the sector.
Annex 1 firms are subject to FCA registration for anti-money laundering purposes, rather than the wider FCA regulatory framework that applies to authorised financial services businesses. The FCA’s latest statement therefore focuses specifically on the risks associated with these businesses and the need for appropriate financial crime controls.
The regulator’s action places greater emphasis on the individual responsibilities of firms within corporate groups. Businesses cannot assume that controls used elsewhere within their group will automatically meet their own regulatory obligations.
The FCA’s latest statement also reinforces the importance of due diligence for regulated firms dealing with Annex 1 businesses, particularly in establishing registration status and understanding the nature of the business involved.
The regulator said the information gathered through its expanded scrutiny will help it assess the activities, business models and risks associated with the sector and support efforts to identify and disrupt financial crime risks.
The FCA’s statement does not announce a new prohibition on Annex 1 activities. Instead, it sets out a more closely scrutinised approach to registration and financial crime risks, while warning applicants that registration applications are expected to take longer.
The FCA said businesses carrying out relevant Annex 1 activities without registration should apply for registration and ensure they can demonstrate compliance with the applicable money laundering regulations.