Key Takeaways
- • The FCA imposed restrictions on six unregulated Annex 1 lenders on Friday, 23 October 2026, limiting their ability to take on new customers or conduct new business with existing ones, including extending credit.
- • The restrictions stem from FCA concerns about the anti-money laundering controls of the firms while assessing their applications for registration.
- • Annex 1 firms, which include unregulated lenders, safe custody providers, money brokers and financial leasing companies, must register with the FCA for AML supervision.
- • The action follows the February collapse of bridging lender Market Financial Solutions, which left creditors facing losses of at least £1.3bn and prompted an FCA enforcement investigation in March.
- • The FCA is assessing responses from an information request sent to around 900 registered Annex 1 firms to identify financial crime risks.
Summary
Britain's Financial Conduct Authority (FCA) has imposed restrictions on six unregulated lenders after raising concerns about their anti-money laundering (AML) controls while assessing their applications for registration. The regulator said on Friday, 23 October, that the restrictions limit the firms' ability to take on new customers or do new business with existing ones, including extending credit.
All six are so-called Annex 1 firms, a category covering unregulated lenders, safe custody providers, money brokers and financial leasing companies that must register with the FCA for AML supervision. The regulator has been tightening its oversight of the sector this year. In August, it said it had identified a number of risks among Annex 1 firms, particularly their potential to facilitate financial crime, and warned that registration applications would face closer scrutiny and take longer to process.
The FCA also flagged risks to consumers and markets from unregulated lending conducted through complex structures, including special purpose vehicles (SPVs). It criticised firms for relying on their parent companies' financial crime controls rather than maintaining their own.
The crackdown follows the collapse in February of bridging lender Market Financial Solutions, which entered administration amid allegations of financial irregularities and left creditors facing losses of at least £1.3bn. The FCA opened an enforcement investigation into that firm, itself an Annex 1 lender, in March.
FCA Executive Director for fighting financial crime Steve Smart said: "We have warned Annex 1 firms that they face increased scrutiny. They must demonstrate they can manage the money laundering risks they face. Where they cannot satisfy us, we will intervene." The FCA is also assessing responses to an information request sent to around 900 registered Annex 1 firms, which it said will help identify and disrupt financial crime risks and determine where further action is needed.
All six are so-called Annex 1 firms, a category covering unregulated lenders, safe custody providers, money brokers and financial leasing companies that must register with the FCA for AML supervision. The regulator has been tightening its oversight of the sector this year. In August, it said it had identified a number of risks among Annex 1 firms, particularly their potential to facilitate financial crime, and warned that registration applications would face closer scrutiny and take longer to process.
The FCA also flagged risks to consumers and markets from unregulated lending conducted through complex structures, including special purpose vehicles (SPVs). It criticised firms for relying on their parent companies' financial crime controls rather than maintaining their own.
The crackdown follows the collapse in February of bridging lender Market Financial Solutions, which entered administration amid allegations of financial irregularities and left creditors facing losses of at least £1.3bn. The FCA opened an enforcement investigation into that firm, itself an Annex 1 lender, in March.
FCA Executive Director for fighting financial crime Steve Smart said: "We have warned Annex 1 firms that they face increased scrutiny. They must demonstrate they can manage the money laundering risks they face. Where they cannot satisfy us, we will intervene." The FCA is also assessing responses to an information request sent to around 900 registered Annex 1 firms, which it said will help identify and disrupt financial crime risks and determine where further action is needed.
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