From warning to action
On 23 October 2026, the Financial Conduct Authority (FCA) restricted six Annex 1 firms over concerns about their anti-money laundering (AML) policies, controls, and procedures (FCA, 2026). All six are unregulated lenders. Annex 1 firms must register with the FCA under the Money Laundering Regulations but are not otherwise authorised. Today’s statement makes clear that they are considered to operate in sectors that can present a heightened risk of money laundering and other financial crime, and so a light-touch approach to financial crime compliance is not always appropriate.
In August, the FCA said it would apply increased scrutiny to this group. This announcement shows that scrutiny turning into action. This restriction shows that Annex 1 firms, and the banks and payment firms that serve them, need to pre-empt FCA scrutiny by ensuring their controls align with current expectations.
The FCA is also assessing responses to its information request to around 900 registered Annex 1 firms. Steve Smart, the FCA's executive director lead for fighting financial crime, said: "We have warned Annex 1 firms that they face increased scrutiny." He added that the FCA will intervene where firms cannot meet its expectations (FCA, 2026).
The restrictions limit each firm's ability to take on new customers or do new business with existing customers, including extending credit. The five firms restricted in October must also have an independent review of their AML controls. The commercial consequences are clear: limits on new business and, for one firm, a requirement to wind down its loan book in an orderly way.
How this builds on our August article
The release does not set out the specific failings, but the FCA's statement of 7 August (FCA, 2026) highlighted common failings at Annex 1 firms that likely came into play here. We explored this statement and what it meant for Annex 1 firms in our earlier blog. The FCA said it had seen firms rely too heavily on their parent company's controls, and warned against off-the-shelf procedures built for a different business.
What firms should do now
Practical considerations for Annex 1 firms:
Check that your AML policies, risk assessment, and governance were built for your firm, not copied from a parent company or template.
Consider an independent review of your AML controls before the FCA asks for one. All five October restrictions included one.
Keep management information, testing records, and governance minutes ready to show ongoing oversight.
Practical considerations for regulated firms with Annex 1 exposure:
Confirm an Annex 1 customer's registration status directly, and check the information it gives you independently. The FCA says registration does not replace your own due diligence.
Check whether any of the six firms is in your customer, counterparty, or funding base. Then work out what the restrictions mean for that relationship.
Feed this development into your next financial crime risk assessment.
Final thoughts
In August, the FCA told Annex 1 firms to expect closer attention. Six now have restrictions on their business. Firms in this sector should assume the FCA will act where they cannot show they manage money laundering risk.
FINTRAIL & Cosegic support Annex 1 firms and their regulated counterparties with independent reviews of AML frameworks, financial crime risk assessments, governance reviews, and third-party due diligence improvements. To discuss how this applies to your firm, please get in touch with our team.
References
Financial Conduct Authority (FCA) (2026) 'FCA restricts 6 firms following concerns over anti-money laundering controls'. Available at: https://www.fca.org.uk/news/press-releases/fca-restricts-6-firms-following-concerns-over-anti-money-laundering-controls (Accessed: 23 October 2026).
Financial Conduct Authority (FCA) (2026) 'FCA applying increased scrutiny to Annex 1 firms'. Available at: https://www.fca.org.uk/news/statements/fca-applying-increased-scrutiny-annex-1-firms (Accessed: 23 October 2026).