FCA Review: Nearly a Third of Firms Run No Transaction Monitoring

The short version

A Financial Conduct Authority review of 242 alternative asset managers found that 29% operate no formal transaction monitoring, and one in ten never verify where a client's money comes from. The firms surveyed are not retail forex brokers — but the controls the FCA is measuring are exactly the ones that separate a properly supervised broker from a risky one.

The Financial Conduct Authority has published the results of a financial-crime review covering the alternative asset management sector — the private-markets, hedge-fund and private-equity firms that sit outside the retail spotlight. The regulator surveyed 242 firms and received responses from 87% of them, then measured how each one guards against money laundering.

The picture is uneven. While many firms run mature controls, a substantial minority are missing the basics. Nearly three in ten reported having no formal transaction monitoring system at all — no automated or systematic process for spotting payments that do not fit a client's profile. Others fall short on customer risk assessment, ongoing screening and management oversight.

What the FCA Found

Among the firms that responded, the review recorded the following gaps:

29%

had no formal transaction monitoring system

18%

lacked a documented customer risk-assessment methodology

18%

conducted no formal anti-money-laundering quality assurance

10%

did not verify customers’ source of wealth

carried out no systematic monitoring after onboarding

did not repeat customer screening over time

Exposure varied by business model. Politically exposed persons — people in prominent public positions who carry a higher bribery and corruption risk — appeared in the client bases of 32% of private-market firms, against 9% of firms operating in other areas. That concentration makes the monitoring gaps more consequential where they exist.

Why Transaction Monitoring Matters

Transaction monitoring is the machinery that watches money move. When a broker knows its client, understands their expected activity, and screens payments against that baseline, unusual flows — a sudden large deposit from an unrelated third party, a withdrawal routed to a different jurisdiction — get flagged and investigated. It is the same control that protects a trader from having their account used, knowingly or not, to move other people's illicit funds.

For a retail forex or CFD trader, the relevance is indirect but real. A firm that cannot monitor transactions is a firm that struggles to keep client money clean and segregated, that may not notice account takeover or fraud quickly, and that is more likely to attract regulatory enforcement — the kind that freezes withdrawals and disrupts service. Weak anti-money-laundering controls are rarely the only weakness in a firm; they tend to travel with thin capital, poor record-keeping and lax oversight.

The FCA's finding is a reminder that authorisation is a floor, not a guarantee. Every firm in this review is regulated; the gaps exist anyway. That is precisely why the quality of a broker's controls — not merely the presence of a licence — is worth checking before you fund an account.

What This Means for European Traders

The review is a UK exercise, and the firms in scope are asset managers rather than retail brokers. But the underlying obligations are shared across Europe. EU and EEA brokers operate under the anti-money-laundering directives and MiFID II, supervised by national regulators such as CySEC in Cyprus, BaFin in Germany and the AMF in France. They are required to run customer due diligence, verify source of funds where risk warrants it, monitor activity and report suspicious transactions.

As with the UK, the rules are only as good as their implementation. European regulators publish enforcement actions against firms that fall short, and a broker's track record on compliance is a legitimate signal of how seriously it takes client protection. Our EU forex regulation guide explains how the framework fits together and how to read a broker's licensing.

How to Check a Broker Before You Deposit

You will not audit a broker's transaction monitoring yourself, but you can read the signals that correlate with strong controls:

Verify the licence at source.Check the broker's registration on the regulator's own register (CySEC, BaFin, the FCA), not just a badge on the website.
Expect proper onboarding.A regulated broker that asks for ID and proof of address, and occasionally questions a large deposit, is doing its job — friction here is a good sign, not a bad one.
Look for segregated client funds and a compensation scheme.EU brokers should hold client money separately and be covered by an investor-compensation scheme (up to €20,000 under the ICF for CySEC-regulated firms).
Read the enforcement history. A pattern of regulatory fines or withdrawal complaints is a warning worth heeding.

The brokers in our best regulated forex brokers in the EU ranking are checked against regulator databases, with each listing showing the licence number, supervising authority and compensation cover. Established, tier-one-regulated names such as Pepperstone, IG and Saxo Bank combine long operating histories with the kind of compliance infrastructure the FCA is measuring. For a fuller walkthrough of the red flags, see our guide to spotting a forex scam in Europe.

Bottom Line

The FCA is not accusing the sector of wrongdoing; it is documenting how far practice varies even among authorised firms. For traders, the lesson carries straight across the Channel: a licence tells you a firm has cleared a minimum bar, but the strength of its controls — how it verifies clients, monitors money and handles risk — is what actually protects your account. Choose the broker whose compliance you can verify, not the one with the loudest marketing.