Cash, crime and controls: What the FCA wants you to know (and do)

In recent years, the Financial Conduct Authority (FCA) has placed increased emphasis on the risks associated with cash-based money laundering. As part of this focus, it has issued guidance for banks operating under the Banking Framework Agreement, outlining the controls they're expected to apply to cash deposits made by their customers through various channels.

In April this year, the FCA indicated that it's planning to undertake a proactive multi-firm review in the financial year 2025/26, looking at the financial crime risks from cash-based money laundering across wider deposit channels. And it added: “Further reducing the threat from cash deposits, including those across all deposit channels, will remain a priority.”

The regulator expects firms to keep controls across all cash deposit routes under review – including those applied in high-street branches and cash centres – as part of a broader effort to strengthen defences against cash-based money laundering.

Why now?

The National Economic Crime Centre (NECC) has estimated that hundreds of millions of pounds are laundered each year through cash deposit channels. In response, in 2023 the FCA collaborated with the NECC, banks and other stakeholders to evaluate the effectiveness of existing controls and identify areas for improvement.

This review found that some participating banks and other cash deposit service providers had not sufficiently adapted their systems and controls to reflect the specific risks associated with cash deposit channels.

The Government's 2025 national risk assessment of money laundering and terrorist financing highlighted cash as high risk due to its anonymity and difficulty to trace. It is frequently used to conceal the origins of criminal proceeds, particularly during the layering and integration stages of money laundering. The assessment also identified vulnerabilities in cash-intensive businesses and retail banking, especially where deposit channels lack transparency or aren't sufficiently monitored.

Firms are expected to understand and assess their exposure to these risks and tailor their due diligence controls accordingly.

What's expected of firms?

The FCA set out its expectations for firms operating under the Banking Framework Agreement in April 2023. These include:

• transitioning from paying-in slips to card-based deposits, which provide greater traceability
• lowering cash deposit limits to help identify unusual activity, while maintaining flexibility for legitimate business needs
• strengthening transaction monitoring capabilities and ensuring staff receive targeted training on identifying and responding to cash-based money laundering risks
• improving the speed and quality of suspicious activity reporting, as well as stronger collaboration and intelligence sharing across the sector.

The FCA has also confirmed that its interest in driving improvements to cash-based money laundering controls won't be limited to its 2025/26 review and will remain a key focus as part of its five-year strategy to 2030.

What should firms do?

If you're concerned about your firm’s exposure to cash-based money laundering risks or you want to make sure that your controls will meet the FCA’s expectations, the first step should be an up-to-date review of your cash-based money laundering risk exposure. You should also carry out a related gap analysis of your controls across all cash channels.

These will allow you to pinpoint any areas that might require improvement and to take action before the launch of any FCA thematic review.

How we can help

We can support you with completing regulatory reviews, including direct engagement with the FCA. We've completed multiple skilled person reviews for UK high-street banks, the most recent of which involved a specific focus on cash deposit controls.

We're experienced in designing and enhancing anti-money laundering (AML) control frameworks, and fully understand the challenges you face in managing cash-based money laundering risks, as well as the regulatory standards you need to meet and the operational solutions which may help mitigate the risks.

For further insight and guidance, contact Lucinda Hallan, Carla Phillips or Luke Rowan.