Financial Services Matters - December 2025

FCA announces measures to boost investment culture

On 8 December 2025, the FCA unveiled a series of policy initiatives "to empower retail investment, reinforce wholesale markets and maintain the UK's position as a world-leading financial centre."

The package of measures includes:

• a discussion paper on expanding consumer access to investments (DP25/3) (closes on 6 March 2026)

• a consultation paper on client categorisation and conflicts of interest (CP25/36) (see below)

• a policy statement setting out final rules for consumer composite investments, which replaces EU-derived disclosure rules for PRIIPs and UCITS (PS25/20).

In addition, the FCA confirmed that rules for target supported will be published shortly and provided an update on the Consumer Duty for firms that work together to manufacture products or services (see our Consumer Duty section below).

In CP25/36, the FCA is proposing the following changes to its elective professional client categorisation rules:

• removing the quantitative test in COBS 3.5.3R(2)

• improving the qualitative assessment that firms undertake

• introducing an alternative wealth assessment

• improving safeguards around clients who opt-out of retail protections.

Alongside these proposals, it is consulting on simplifying the criteria for categorisation as a per se professional client. 

The consultation also covers proposed changes to the conflicts of interest rules in SYSC.

It closes on 2 February 2026.

HM Treasury update on provisional authorisation regime

On 4 December 2025, HM Treasury published a policy paper providing an update on the creation of a provisional licensing authorisation regime.

Following the government's Regulation Action Plan published in March 2025, the government has been working with the FCA to establish a new authorisation regime which aims to reduce the obstacles that financial services firms face when seeking authorisation.

The regime is expected to be most appropriate for early-stage firms with an innovative business model that would otherwise find it difficult to meet the threshold conditions in the Financial Services and Markets Act 2000 (FSMA) required to obtain authorisation in a reasonable timeframe.

The paper outlines how the regime is expected to operate once established.

Important points to note include:

• The regime is intended for firms that are not already authorised and are seeking permission under Part 4A of FSMA for activities already within the FCA's perimeter.

• The purpose of the regime is to support firms with obtaining full authorisation during or at the end of the provisional licence period. Once they have achieved full authorisation they will exit the regime.

• The FCA's approach to assessing applications for provisional licences against the threshold conditions will be proportionate. This means that it will take into account the firm's stage of development and the fact that the firm has applied for a time-limited authorisation. 

• Firms will need to show that they can meet the threshold conditions for the period of the provisional licence. This will include having appropriate resources (both financial and non-financial) for the period of the provisional licence only, allowing them the time and flexibility to strengthen these further during the provisional licence period.

• Provisional licences will apply for a fixed duration of up to 18 months. This may be extended in limited circumstances.

• During the provisional licence period, firms will be subject to relevant rules and must continue to meet the threshold conditions. The FCA will engage with the firm during the provisional licence period and will retain its full range of supervisory and enforcement powers.

The government will bring forward primary legislation to introduce the regime when parliamentary time allows. The FCA will engage with industry on the design of the regime and consult as required.

FPC assessment of bank capital requirements

On 2 December 2025, alongside the publication of its Financial Stability Report, the Bank of England (BoE) published the latest issue of Financial Stability in Focus (FSF). FSFs set out the Financial Policy Committee's (FPC) views on specific topics relating to financial stability. This FSF contains the FPC's assessment of capital requirements for UK banks.

Key points to note include:

• Capital requirements. The FPC has determined that the appropriate benchmark for the system-wide level of Tier 1 capital requirements is now around 13% of risk weighted assets. This is a one percentage point lower than its previous benchmark of 14% benchmark (which it set out in 2015 in its first assessment of appropriate levels of capital requirements for the banking system, and which it restated in 2019). The revised benchmark equates to a Common Equity Tier 1 ratio of approximately 11%. The FPC says that the reduction is consistent with how the financial system has evolved since 2015, referring in particular to a fall in banks’ average risk weights, a reduction in the systemic importance of some banks, and improvements in risk measurement.

• Buffers. The FPC will work together with the Prudential Regulation Authority and international authorities to improve the usability of regulatory buffers in order to reduce incentives for banks to maintain capital exceeding regulatory requirements.

• Leverage. The FPC will review how the leverage ratio has been implemented in the UK. As part of this review, it will prioritise an assessment of the UK's approach to regulatory buffers in leverage ratio requirements. The FPC is concerned that a drop in banks’ average risk weights has resulted in the leverage ratio becoming the "binding requirement," or close to the binding requirement, for a growing number of banks, rather than risk-weighted requirements forming the binding constraint as intended when the leverage ratio was introduced in 2015. It notes that for three out of seven major UK banks, the leverage-based minimum requirements and buffers are the binding requirement for Tier 1 requirements at a consolidated level.

• Interaction between capital requirements applying to UK lending. Many elements of the UK's "capital stack" are adjusted separately by reference to a bank's exposure to UK lending. There is a perception among banks that these requirements restrict domestic activity. The FPC supports work that the BoE is undertaking on the relationship between these different capital components.

Feedback on the FSF should be provided to the BoE by 2 April 2026.

On 2 December, the BoE also published its Financial Stability Report for 2025.

FSB chair letter to G20 Leaders

On 20 November 2025, the Financial Stability Board (FSB) published a letter (dated 18 November 2025) from its Chair, addressed to G20 Leaders ahead of their 2025 Summit.

Among other things, the Chair, following acknowledgment of the challenging economic outlook, calls for global efforts to modernise and strengthen financial regulations without financial stability.

Important points noted in the letter include:

• FSB Implementation Monitoring Review October 2025. The review identified significant gaps in the implementation of G20 financial reform.

• Increasing role of non-bank financial intermediaries. FSB is assessing the implications of the growing existence of intermediaries on financial stability, with the July 2025 recommendations of the FSB highlighted as a key step forward on leverage of non-banks. 

• Cross-border payments and digital assets. Cross-border payments remain slow, expensive and inefficient, with current progress insufficient to meet G20 targets. Urgent acceleration is needed, including addressing national policy constraints such as capital controls.

The FSB's work programme will focus on stablecoins and other payment forms, emphasising the need for effective frameworks that support safe innovation and cross-border operation.

FCA updated statement of policy on regulatory failure investigations

On 14 November 2025 the FCA published its updated statement of policy on statutory investigations into regulatory failure.

The FCA is required, under Part 5 of the Financial Services Act 2012, to investigate and make a report to HM Treasury where it considers there has been a serious failure in the system of financial regulation, or in the operation of that system.

In the statement of policy, the FCA sets out its approach for determining whether a regulatory failure has occurred, its process for the undertaking of an investigation into such regulatory failure and details its reporting process to HM Treasury.

Important updates to the statement of policy since 2013 include:

• The addition of the following new objective. When discharging its general functions, the FCA must facilitate the international competitiveness of the UK economy and its medium to long term growth. 

• The revision of monetary thresholds for determining 'significance'. The thresholds have been revised in line with inflation, creating a range of total gross consumer detriment of £45 million to £210 million to assist in determining whether the effect of the relevant events is 'significant'. 

Where detriment exceeds £210 million, the FCA is more likely to consider the adverse effect significant, whilst detriment below £45 million is unlikely to meet the threshold unless qualitative factors apply, such as consumer vulnerability.

IOSCO final report on neo-brokers

On 12 November 2025, the International Organisation of Securities Commissions (IOSCO) published its final report on neo-brokers (the Report)

Neo-brokers are a sub-set of digital-first broker-dealers that provide services, with limited human interaction, through a business model characterised by their use of engaging client interfaces, leverage of social media and provision of online-only investment services.

The IOSCO recognises the importance of the neo-broker business model for enhancing market access. However, its report highlights risks associated with the business model and provides five key recommendations for regulators and firms to ensure that neo-brokers operate in an environment that prioritises investor protection and market transparency.

The recommendations are:

• Act honestly and fairly. Neo-brokers should act honestly, fairly and professionally with retail investors. 

• Appropriate disclosure of fees and charges. Neo-brokers should provide appropriate disclosure of material fees and charges the retail investor may incur by entering the trade. 

• Ancillary services disclosures. Where neo-brokers offer ancillary services to core trade execution services, IOSCO members should consider whether neo-brokers should disclose to retail investors the material sources of revenue that the firm derives from each service and, where relevant, the type of conflicts of interest arising from them. They should also obtain retail investor consent before providing ancillary services. 

• Non-commission related trading revenue. Neo-brokers should consider the impact of payment for order flow on the best execution of customer orders. Factors that neo-brokers could consider include price of security, order size, type of security, type of order, trading characteristics of security, price improvement, as well as speed and probability of execution. 

• IT infrastructure. Neo-brokers should ensure they have robust systems in place to promptly address disruptions that may prevent investors from using their platform effectively. 

The Report is the final milestone of the IOSCO Roadmap to Retail Investor Online Safety, concluding a year of spotlight on the new challenges to retail investor protection.

HM Treasury launches financial inclusion strategy

On 5 November 2025, HM Treasury published its new Financial Inclusion Strategy (Strategy), setting out a national plan prioritising the removal of barriers to financial participation and the building of financial resilience.

The strategy focuses on the following important areas: 

• Digital inclusion and access to banking. HM Treasury aims to deliver increased access to digital banking services through a pilot partnership between the largest banks and third sector to make it easier for individuals who lack standard ID to open bank accounts, the creation of 350 in-person banking hubs to secure access to banking services, and the creation of an 'inclusive design' government-backed industry working group focused on ways to make financial products more accessible for current excluded and underserved individuals. 

• Support for savings. HM Treasury aims to create an environment that supports individuals to build their savings through the delivery of regulatory clarity for employers that enables the offering of workplace savings schemes, and the launch of a national coalition for employers to drive awareness and adoption of workplace savings schemes.

• Financial resilience through insurance. HM Treasury aims to close the protection gap through the launch of a pilot led by Fair4All Finance focused on analysing the uptake of contents insurance among social renters in England, the development of a signposting initiative to help individuals find the most appropriate insurance cover, the creation of a working group, led by ABI in collaboration with the Money and Mental Health Policy Institute and the FCA, focused on travel insurance for individuals with pre-existing medical conditions.

• Access to affordable credit. HM Treasury aims to ensure individuals can access safe, affordable and responsible credit, through the launch of a £30 million fund to support credit union transformation in England, the support of a small sum lending pilot led by Fair4All Finance, and the development of an approach to tackle the impact of coerced debt on victim-survivors' credit files. Alongside the reform of the Consumer Credit Act 1974, the government will consider the merits of credit broking exemptions being extended beyond registered social landlords to capture other organisations who play a role in supporting consumers with their finances.

• Tackling problem debt. HM Treasury aims to ensure individuals with problem debt are afforded fair treatment from creditors, through the provision of increased funding for the purpose of increase the ability of individuals to access specialist debt advice, the creation of referral partnerships to make it easier for individuals to reach debt advice, and (improved public sector and debt collection practices.

• Financial education and capability. HM Treasury aims to ensure financial education is provided to young people, through most notably compulsory financial education at primary school level in England.

The Strategy noted that the financial services sector has a vital role to play in the promotion of financial inclusion, as the provider of financial products and services relied upon by consumers across the UK.

On 28 November 2025, the Treasury Committee launched a new inquiry focused on examining the Strategy. The deadline for responding to the associated call for evidence is 12 January 2026.

FCA speech on the role of the Chief Risk Officer

On 5 November 2025, the FCA published a speech delivered by Sarah Pritchard (Deputy Chief Executive, FCA) focusing on the critical role that Chief Risk Officers (CROs) play in responsible risk taking within firms.

Notable aspects of the speech include:

• Outcomes focused regulation. Pritchard highlighted the FCA's commitment to outcomes-focused regulation with the focus being the reasoning behind its decision to not separately regulate for AI. 

• Problem solving and myth busting. The regulator wants to work collaboratively with industry to solve broader issues and is actively seeking input from firms on perceived regulatory barriers that may be preventing delivery of desired outcomes, acknowledging that CROs have a unique view of where regulatory barriers exist or where firms may be overcomplicating matters through custom and practice.

• Rebalancing risk in practice. The speech provides the introduction of the Private Intermittent Securities and Capital Exchange System (PISCES) as an example of the FCA's rebalancing risk for growth strategy, with the world-first private stock market that unlocks capital by enabling companies to raise capital whilst staying private. The FCA deliberately applied "private market plus" safeguards, disapplying insider dealing rules and placing more emphasis on investor due diligence, publicly acknowledging this risk trade-off as necessary to support growth.

• Call for help. Pritchard concluded by emphasising that the FCA recognises more risk is needed in the system to drive growth, and encouraged CROs to identify sticking points, myths requiring debunking, or missed opportunities, reaffirming the regulator's commitment to collaborative engagement with industry.

FCA guidance on Berne Financial Services Agreement

On 3 November 2025, the Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA) co-published guidelines for firms on the Berne Financial Services Agreement (BFSA). 

The BFSA will make cross-border trade in financial services to wholesale and sophisticated clients easier for UK and Swiss firms.

The guidelines for UK investment services firms are:

• Notifications. UK firms must notify the FCA once before providing investment services to Swiss clients through client advisers in Switzerland on a temporary basis. 

• Conditions. Before starting to supply covered services (as defined under the BFSA), UK firms providing investment services into Switzerland through client advisers must provide covered clients with certain disclosures. 

The guidelines for UK insurance firms within the scope of BFSA are:

• Covered clients. Clients to whom a UK insurance firm may provide insurance services to under the BFSA must be incorporated in Switzerland and meet at least two of the three requirements listed in the BFSA when the insurance or intermediation contract is concluded, renewed or amended. The three requirements are that a client has a net turnover in excess of CHF 40 million, a balance sheet total in excess of CHF 20 million, and in excess of 250 employees. 

• Eligibility. The UK insurance firm must be an entity incorporated or formed under UK law, a resident of the UK, or the UK branch of a Covered Financial Services Supplier of Switzerland (as defined under the BFSA), be authorised and supervised as an insurer or insurance intermediary in the UK, and supply the relevant covered services in respect of risks located outside Switzerland. 

Additional criteria also apply for insurers:

• Notifications. To provide Covered Services, UK insurers must complete the required notification form which will be available on the FCA Connect system, and no later than 30 days following receipt of the firm's notification, the PCA and FCA together will confirm the FINMA whether the firm is eligible and of good standing. FINMA will, within 30 days of such confirmation from the PRA and FCA, include the firm on its public BFSA register, with the day of inclusion being the first day from which the firm can begin to provide the covered services in Switzerland. The PRA should be notified if an insurer does not provide covered services for risks outside Switzerland, even if permitted to do so in the UK. Following consultation with the notifying firm, the PRA will communicate the extent of the insurer's services outside Switzerland to FINMA for the insurer's registration under the BFSA to be restricted as appropriate.

• Conditions. UK insurance firms providing services under the BFSA must comply with disclosure requirements to covered clients in Switzerland and annual reporting. Additionally, insurers must notify, through the FCA Connect system, FINMA and the relevant UK supervisory authority of any change relevant to its BFSA register entry. 

• Reporting. UK insurers must report annually to FINMA, with the form of the report capable of being submitted electronically and a copy automatically being provided to the PRA and FCA upon the initial FINMA submission. Reporting should cover the preceding 12-month calendar year, and the submission deadline date is expected to be 30 April. Reporting should provide the information set out in the BFSA and its MoU, including the name of the firm, the FCA and BFSA reference number of the firm, a list of the covered services supplied to covered clients, and the total value of gross premiums for activities carried out specified by type of covered services.

Court of Appeal considers FCA's client categorisation rules

As part of its judgment in Linear Investments Ltd v Financial Ombudsman Service Ltd [2025] EWCA Civ 1449 (delivered on 29 October 2025), the Court of Appeal considered the regulatory requirements for categorising clients as elective professional clients under COBS 3.5.3(1)R. 

The Court held that firms cannot simply rely on tick-box responses when there are red flags requiring further enquiry. It noted that it is unlikely to be enough to satisfy COBS 3.5.3(1)R for a firm simply to require a client to complete general tick boxes containing statements in relation to their trading experience only.

Red flags in this case included:

• The client's explanation of experience, which mentioned only blue chip stocks with no reference to CFDs.

• Failure to provide supporting evidence, and inconsistencies in responses. The Court emphasised that "trading CFDs for speculative purposes is a materially different activity from buying and selling stocks and shares in the conventional way". 

• As part of its assessment under the quantitative test inadequate, the firm had not done enough to determine whether the client had carried out the specified number of transactions "in significant size, on the relevant market". The tick-box options did not specify which market the client had traded on or the lot size, making it impossible to make this determination.

The judgment reinforces the need for regulated firms to have processes which enable them to make a robust assessment of clients' expertise, knowledge and experience, in order to identify inconsistencies with the information provided, and to seek adequate substantiation of information. This is the case even if the client has made inaccurate statements.

As part of its growth agenda, on 8 December 2025 the FCA published a consultation paper on changes to its client categorisation rules - please see our general section for further details.

FCA launches stablecoin cohort of Regulatory Sandbox

On 26 November 2025, the FCA published a new webpage to launch a special cohort within its Regulatory Sandbox for stablecoin issuing firms.

The new cohort is intended to enable issuers to test their stablecoin products and services under the UK's regulatory regime for stablecoins. The FCA is inviting applications from firms that plan to issue a stablecoin in the UK under the upcoming regime and from companies ready to test their stablecoin and help shape the FCA's policy.

The FCA advises applicants to demonstrate:

• clear readiness to begin testing

• confirm they have appropriate permissions and resources

• provide a well-aligned test plan

• ensure their application is as detailed as possible.

The deadline for applications is 18 January 2026.

Property (Digital Assets etc) Bill receives Royal Assent 

On 2 December 2025, the Property (Digital Assets etc) Bill (the Bill) received Royal Assent and entered into force as the Property (Digital Assets etc) Act 2025, having completed its third reading in the House of Commons on 19 November 2025 with no further amendments.

The Act gives effect to recommendations of the Law Commission to confirm in statute that a thing that is digital or electronic in nature is not prevented from being personal property.

Investment Association report on tokenised asset markets

On 12 November 2025, the Investment Association together with the Investment Management Association of Singapore, published a joint report (the Report) examining the opportunities and challenges in tokenised asset markets across the UK and Singapore. The Report highlights an "adoption gap" between innovation in digital assets and investor requirements and introduces a practical operational readiness checklist to guide market participants intending to launch tokenised financial products.

IOSCO final report on tokenisation of financial assets

On 11 November 2025, the International Organisation of Securities Commissions (IOSCO) published its final report on the tokenisation of financial assets. The report reflects observations from a monitoring exercise conducted by IOSCO through its Fintech Task Force.

The primary purpose of the report is to develop a shared understanding among IOSCO members on the adoption and current use-cases of asset tokenisation in capital markets. It considers the potential impact on market integrity and investor protection to help members plan effective regulatory responses.

Important observations made in the report include:

• Tokenisation arrangements remain a small part of the financial sector. While there is evidence of broader investor access, many of the benefits, particularly concerning secondary market liquidity appear not to be fully achieved yet.

• Impact variation. The impact of tokenisation on lifecycle activities varies depending on the implementation model and the degree of integration with distributed ledger technology.

• Structural challenges. The primary structural challenges in scaling tokenisation are the lack of interoperability across blockchains and a lack of high-quality settlement assets. 

• Regulatory considerations. The risks from financial assets created through tokenisation are similar to conventional financial assets, although tokenisation may also lead to vulnerabilities and risks that are unique to the technology itself. 

Based on the principle of 'same activities, same risks, same regulatory outcomes', IOSCO suggests that members consider how its Objectives and Principles of Securities Regulation (together with relevant supporting IOSCO standards and good practices) apply to tokenised financial assets and tokenisation arrangements.

Bank of England launches consultation on regulating systematic stablecoins

On 10 November 2025, the Bank of England (BoE) published a consultation paper on regulating sterling-domination stablecoins for UK payments issued by non-banks.

Sterling-dominated systematic stablecoins are a new type of digital money designed to maintain a stable value and could be used for retail payment and wholesale settlement in the future. They will be regulated by the BoE and the FCA.

The consultation paper sets out the proposed regulatory regime of the BoE, which incorporates industry feedback received following the 2023 discussion paper, including:

• Backing assets. The BoE proposes that stablecoin issuers will be permitted to hold up to 60% of backing assets in short-term sterling-denominated UK government debt securities, with the remaining 40% proposed to be held as unremunerated deposits at the BoE. 

• Capital and reserve requirements. The BoE proposes to retain existing international standards for setting capital requirements, with amendments to be included. Additionally, it is proposed that systematic stablecoin issuers will be required to maintain capital to cover general business risk.

• Holding limits. The BoE proposes temporary per-coin holding limits of £10 million for businesses and £20,000 for individuals.

• Determining systematic importance. The Consultation Paper sets out a number of specific criteria and indicators which the Bank will look at when providing advice to HM Treasury as to whether a stablecoin should be considered systemic.

• Interest. The BoE has retained its position that systemic stablecoins should not be a means of investment and should not pay holders interest.

• Location. UK systemic, but non-UK based, sterling-denominated stablecoin entities must establish a UK subsidiary with backing assets and capital held in the UK in order to carry out business and issuance activities in the UK and with UK-based consumers. 

The consultation closes for responses on 10 February 2026. The regime is expected to be finalised later in 2026.

MiCA update

ESMA transitional measures statement under MiCA

On 4 December 2025, ESMA published a statement on the transitional measures in Article 143(3) of the EU Markets in Crypto-Assets Regulation (MiCA). The transitional measures provided crypto asset service providers (CASPs) with more time to transition from compliance with their national regulator frameworks to compliance under MiCA.

ESMA notes that:

• some transitional periods have expired and that the remaining periods will be ending soon

• market participants have had time to engage with their national competent authorities (NCAs) regarding MiCA authorisation.

ESMA expects CASPs that are not yet authorised under MiCA to have:

• implemented orderly wind down plans for the services they provided in member states where the transitional period has ended

• established orderly wind down plans ready for implementation prior to the expiry of the remaining transitional periods should they not be authorised by then or at all.

ESMA also warns NCAs to treat "last minute" applications for authorisation under MiCA with great caution and to evaluate their compliance with MiCA to the same standard as all other applications. In addition, ESMA reminds NCAs that they are expected to be ready to enforce against the unauthorised provision of crypto-asset services, cooperating with other NCAs. 

ESMA closes the statement by alerting investors who engage with crypto assets that:

• there is no guarantee that an entity providing crypto asset services after the expiry of the transitional period are authorised under MiCA

• they should check the ESMA interim MiCA register to confirm that the CASP entity they are dealing with is authorised to provide crypto asset services under MiCA.

ESMA updates list of grandfathering periods

On 1 December 2025, the European Securities and Markets Authority (ESMA) published an updated list of grandfathering periods decided by Member States under MiCA, as communicated to ESMA.

ESMA statement on implementation of MiCA data standards and format requirements

On 28 November 2025, ESMA published a statement on technical specifications for implementing a number of data standards and format requirements under MiCA.

The standards and requirements relevant to the statement include:

• format of order book records for cryptoassets service providers (CASPs)

• data standard requirements for all CASPs under Commission Delegated Regulation (EU) 2025/1140

• transparency data of CASPs operating a trading platform for cryptoassets

• white paper format and data standards under Commission Implementing Regulation (EU) 2024/2984

• data requirements for white paper classification under Commission Delegated Regulation (EU) 2025/421. 

The statement aims to provide practical guidance to market participants in complying with their requirements.

EBA report on PSD2 authorisation

On 5 December 2025, the EBA published a follow-up report to its 2023 peer review report on the authorisation of payment institutions and e-money institutions under the revised Payment Services Directive (PSD2).

The report relates to authorisations between 2022 and 2024 and considers the implementation of the 2023 recommendations by supervisors. Topics assessed include authorisation processes, implementation of the EBA guidelines on authorisation, and governance and internal controls.

Key findings of the report include:

• Application volumes and authorisation timelines continue to vary significantly across member states, ranging between four-six months and up to 27 months in one member state. 

• Most supervisors received fewer applications compared to 2019-2022. This is largely attributed to market maturity and the end of Brexit-driven demand.

• Most supervisors have improved the efficiency of the authorisation process, by taking steps such as giving clearer guidance, strengthening pre-application engagement and enhancing internal procedures. However, delays remain as not all changes have had a significant impact.

• While there has been progress in addressing gaps in governance and internal controls that were identified in the 2023 report, there remains an inconsistent approach to implementation across supervisors. This creates the risk of different supervisory outcomes and an uneven playing field and may give rise to regulatory arbitrage. In relation to anti-money laundering and countering the financing of terrorism control, further work is needed to remedy remaining deficiencies.

Provisional agreement reached on EU PSR and PSD3

On 27 November 2025, the Council of the EU (Council) and the EU Parliament (Parliament) announced that a provisional agreement had been reached on a new Payment Services Regulation (PSR) and a revised Payment Services Directive (PSD3), replacing the existing Payment Services Directive (PSD2) and the Electronic Money Directive (EMD2). Please see our article for further detail.

High Court rejects banks' application for summary judgement of Quincecare claims

On 19 November 2025, the High Court, in Arena Television Ltd (in liquidation) and another v Bank of Scotland plc and another [2025] EWHC 3036 (Comm), rejected an application for summary judgment or strike out of a case relating to the 'Quincecare duty'.

Background

Two directors of Arena Television Ltd and Arena Holdings Ltd (Arena) allegedly used the companies as a vehicle to commit asset-backed lending (ABL) fraud. Arena claimed that the banks had breached their mandates with Arena by processing payment instructions given by the directors without actual authority (that is, in breach of the Quincecare duty). The banks made an application for summary judgment or strike out.

Rejection of summary judgment

• The court largely rejected the banks' arguments, suggesting it was arguable that, at least in the absence of express agreement of the principal otherwise, an agent only has actual authority to act honestly in pursuit of the interests of the principal. The banks' claimed that whilst agents cannot have actual authority to act dishonestly to further their own interests in opposition to their principal, they can have actual authority to commit fraud against third parties in pursuing their principal's business. However, it was arguable that there was no realistic distinction that could be drawn between frauds on and by the principal. The issue of the directors' actual authority had to be settled at trial.

• The scope of a bank's duty of care to its customers does not extend to protecting customers against authorised payments from their account or the consequences of transactions entered into by customers.

The judgment provides insights into how the courts will consider Quincecare cases relating to directors' authority to give payment instructions.

PSR compliance report on confirmation of payee system

On 18 November 2025, the PSR published a compliance report (the Compliance Report) on Specific Direction 17 as it relates to the confirmation of payee system.

The Compliance Report found that compliance with the direction to deliver a confirmation of payee system (CoP) is strong. Notable findings of the Compliance Report include:

• 320 firms implemented CoP checks prior to the deadline. Over 320 organisations offer CoP checks in the UK, with CoP covering around 99% of the payments market by October 2024.

• Enforcement action. The PSR continues to monitor a small group of firms that still do not have a CoP system. It has opened three enforcement investigations into Group 2 firms who did not meet the deadline (this is in addition to one investigation into Group 1 firms, which is ongoing). 

• Reminder to directed firms. Directed firms, as part of the Compliance Report, have been reminded of their obligations to maintain transparency regarding their ability to comply with their PSR requirements. Firms should be proactive in communication with the PSR if it is likely that a deadline will be or has been missed. 

The PSR states that CoP is a vital step in safeguarding consumers and reducing fraud-related losses across the UK. It notes that, together with the authorised push payment reimbursement requirement, it should help to increase trust in payments.

HM Treasury strategy for future retails payment infrastructure

On 7 November 2025, the Payments Vision Delivery Committee (the Committee) published a policy paper setting out its strategy for the future UK retail payments infrastructure (the Strategy).

The Strategy is centred on five high-level strategic outcomes:

• Consumers and businesses having a greater choice of innovative and cost-effective payment options that meet their needs.

• Payments operating seamlessly as part of a diverse multi-money ecosystem, with interoperability between new and existing forms of digital money. 

• Consumers and businesses having trust that their payments are protected from fraud and wider financial crime. 

• Participant firms having fair, transparent and non-discriminatory access to the infrastructure.

• The payments ecosystem being operationally and financially resilient.

The priority of the Committee is to ensure the next-generation infrastructure delivers a more customer and business friendly approach to 'account-to-account' functionality at the point of sale.

FCA statement on review of credit builder products

On 10 November 2025, the FCA published a statement setting out its findings following a review of credit builder products. 

The review focused on specific credit builder products that report regular payments to CRAs with the sole aim of helping consumers build their credit score or history. These products typically do not involve regulated credit, but because they are closely linked to the wider credit market and tend to be marketed to people who have little or no credit history, the FCA examined how they affect consumers.

Key findings included:

• Effectiveness. For most consumers, there is little evidence that these credit builder products significantly improve credit scores.

• Potential risks. In some cases, firms reporting payments on these products to CRAs can potentially misrepresent a customer’s financial circumstances and help facilitate access to unaffordable credit. For consumers experiencing financial difficulty, these products are even less likely to positively affect credit scores and may reduce the amount of income available for essential living expenses.

• Complexity and regulation. Many of the credit builder products we looked at are unregulated and firms often fail to clearly explain their limitations and risks.

Based on FCA feedback provided to firms as part of this review, five firms have chosen to stop offering this type of credit builder product. Others have changed their products, business models and marketing materials.

The review did not cover other products often described as credit builders, such as low-limit credit cards, rent reporting services, or services which simply explain how credit files work.

FSMA (Regulated Activities etc) (Amendment) (No 2) Order 2025 laid before Parliament

On 5 November 2025, the Financial Services and Markets Act 2000 (Regulated Activities etc.) (Amendment) (No. 2) Order 2025 was laid before Parliament.

The Order amends the Financial Services and Markets Act 2000 (Regulated Activities etc) (Amendment) Order 2025 (SI 2025/859) (the 2025 Order), which provides for certain buy-now-pay-later (BNPL) agreements to become regulated credit agreements with effect from 15 July 2026.

Generally, merchants that introduce customers to regulated credit products must have regulatory approval for credit broking unless an exemption applies. Under the amended RAO, nearly all merchants brokering BNPL products are exempt from credit broking regulation due to a new provision introduced by the 2025 Order. However, domestic premises suppliers were excluded from this exemption due to historical concerns about pressure selling in customers' homes.

The Order amends the 2025 Order to remove this exclusion, following HM Treasury engagement with the FCA and industry. The effect is that domestic premises suppliers will be exempt from credit broking regulation when they offer newly regulated BNPL products to their customers, bringing them in line with the treatment of other merchants when the BNPL regulatory regime commences in July 2026.

The Order came into force on 3 December 2025.

Motor finance update

On 3 December 2025, the FCA published a policy statement, detailing changes to handling rules for motor finance complaints. 

The changes follow the proposals included at chapter 11 of the October 2025 consultation. The FCA is proceeding with the proposals as consulted on, with one amendment: it has decided to end the further extension on 31 May 2026 rather than 31 July 2026.

Most notably, the policy statement confirms that it is likely that the FCA will proceed with the introduction of a motor finance compensation scheme. 

Additional points to note in the policy statement include:

• Firms must continue progressing complaints already received, including investigating and collecting evidence to help with their resolution. 

• Should the scheme proceed, the date of 31 May 2026 will be superseded by the operational timetable set out in the final scheme rules.

• Firms must continue progressing complaints already received, including investigating and collecting evidence to help with their resolution. 

The consultation on the scheme rules closes on 12 December 2025 (see below). The FCA expects to publish final scheme rules in February or March 2026.

Alongside the publication of the publication of the policy statement, the FCA published a Dear CEO letter addressed to motor finance firms. Firms are expected to continue the preparatory work outlined in an earlier Dear CEO letter (issued on 7 October 2025), including identifying and organising complaint files, collating relevant information needed to resolve complaints, and assessing which complaints may be in scope or out of scope of any potential scheme.

FCA progress update on motor finance compensation scheme consultation

On 5 November 2025, the FCA issued a statement providing an update on the motor finance compensation scheme consultation proposals.

As a result of the industry feedback it has received to date, the FCA has extended the deadline for responses to the consultation from 18 November 2025 to 12 December 2025.

The FCA highlights some of the issues that have been raised so far including:

• the methodology for calculating redress

• the rate of compensatory interest

• how independent mechanisms will ensure confidence (including the role of the Financial Ombudsman and suggestions for alternative approaches)

• how smaller firms can operate the scheme cost effectively

• how to prevent fraud

• the commercial impact of the relationship between motor manufacturers and captive lenders, particularly for the purchase of new cars.

FCA consults on targeted clarifications of FCA Handbook materials

On 9 December 2025, the FCA published a consultation paper (CP25/37), which includes a number of amendments that are designed to simplify its rules following the introduction of the Consumer Duty.

The consultation includes proposals to:

• change the eligibility and disclosure rules for packaged bank accounts

• amend chapters 6 and 7 of its Client Assets Sourcebook to reduce the administrative burden on firms

• update and remove FCA Handbook references (as appropriate) now that the Consumer Duty exists

• retire non-Handbook materials where these are no longer relevant (this relates principally to materials related to the Treating Customers Fairly initiative; it does not include the FCA's guidance for firms on the fair treatment of vulnerable customers (FG21/1), which will be retained and may be updated in the future)

• pilot a directory-style guides for smaller firms, starting with consumer finance in view of the proportion of this sector which fall within the 'small firm' category. 

The consultation paper closes for comments on 27 January 2026.

FCA statement on Consumer Duty

On 8 December 2025, the FCA published a statement on the Consumer Duty alongside a package of measures aimed at boosting UK investment culture (see our General section above). The statement sets out the FCA's Consumer Duty expectations of firms that work together to manufacture products or services.

The FCA says that it will be considering the rules that relate to such firms as part of its overall work in H1 2026 to review the application of the Duty.

In its engagement with firms to date, the FCA has observed that some aspects of its rules have been misinterpreted. 

The statement therefore clarifies its expectations of regulated firms working with other regulated firms in a distribution chain. It addresses the following areas:

• decision-making

• allocation of responsibility

• liability

• outsourcing.

The FCA notes that where a regulated firm is working with unregulated parties (such as a payment firm working with an unregulated programme manager to manufacture products), the regulated firm remains responsible for compliance with the FCA's requirements.

FCA findings on CFD provider compliance with Consumer Duty

On 13 November 2025, the FCA published its findings following a multi-firm review of Consumer Duty compliance by contracts for difference (CFD) providers. The review focused on compliance with the Consumer Duty's 'price and value' outcome.

The FCA requested information from 25% of regulated providers, of various sizes, that manufacture and distribute CFDs. The review highlighted good practice examples and areas for improvement.

Notable good practices identified include:

• Applying the Consumer Duty and proportionality. Most firms applied the Consumer Duty as an opportunity to review products and customer experience.

• Fair value assessments (FVAs). Most firms conducted peer comparisons against FCA-authorised direct competitors with good justification for peer selection. Comprehensive FVAs covered scope, analysis and conclusions, considering both monetary and non-monetary factors including target market, consumer understanding and trading characteristics. 

• Appropriateness testing. Some firms strengthened testing by introducing more robust question sets, ensuring retakers received different questions, implementing higher pass rates, introducing or extending cooling-off periods, and limiting retake attempts. 

• Vulnerable clients. Monitoring for vulnerability characteristics at onboarding was widespread, as was training of client-facing staff to identify vulnerability. Good practice included proactive monitoring of daily or intra-day trading and funding with alerts on affordability and marketing restrictions.

• Fees and charges. Most firms reviewed overall charges both pre and post-Duty implementation, with many simplifying fee structures by removing redundant charges and improving disclosure quality. Some firms disclosed fees in real-time within deal tickets as well as contractual documents, and drew clients' attention to the short-term nature of CFDs and potential costs of longer-term holding.

• Interest on client accounts. Several firms reviewed their approach on paying interest on CFD client balances, prompted by higher market interest rates, including consideration of how firms offering alternative products treat clients.

• Matched positions. Some firms discourage retail clients from holding hedged open positions, though all surveyed firms allow it.

Areas for improvement identified include:

• Applying the Consumer Duty and proportionality. The review identified significant variations in how firms have responded to the Duty, with some mid to small-sized firms made few or no changes, suggesting failure to fully consider their obligations.

• Fair value assessments. Material gaps emerged as many FVAs gave limited consideration to costs beyond trading spreads, with most firms failing to consider counterparty hedge pricing despite it being key to price formation. The FCA highlighted wide variations in overnight funding charges with inadequate justification, insufficient disclosure of their impact, and the practice of applying these charges separately on matched positions with no offset, resulting in significant costs despite clients having no actual net market risk exposure. Only a small number of firms paid interest on margin deposits, and most hadn't properly considered whether this would be appropriate. Many firms also failed to adequately consider consumer complaints, satisfaction metrics, or whether to strengthen appropriateness testing to avoid foreseeable harm.

• Appropriateness testing. Some firms made few or no Duty-related changes despite conducting reviews, raising questions about how they balance serving persistent clients with avoiding foreseeable harm.

• Vulnerable clients. Some firms only implemented reactive measures rather than proactive monitoring. The FCA emphasised the need for improved intra-day monitoring of trading and funding activity, particularly where this doesn't match past wealth disclosures or involves increased credit card usage. Some firms with significant client numbers identified few or no vulnerable clients, questioning the effectiveness of their detection arrangements.

• Fees and charges. Significant variations existed in charge levels, particularly for overnight positions, with some firms charging for overnight short positions when others would apply a credit. Most firms could improve disclosure, particularly regarding overnight funding charges which were typically quoted as daily rather than annualised interest rates. Disclosures lacked clarity on how charges are calculated, that they apply to full consideration with no offset against client funds, and the impact of leverage on charge size. Key Information Documents may not clearly highlight non-spread charges or give prominence to the negative impact of overnight funding on outcomes.

• Interest on client accounts. The FCA highlighted asymmetric treatment whereby retail clients pay substantial interest on long CFD positions (charged on full underlying consideration) but receive no interest on margin deposits. Firms should review whether this asymmetry is consistent with providing fair value.

• Matched positions. Firms described varied approaches to margining hedged positions, with some charging full initial margin on both sides. Standard industry practice applies overnight funding charges to both long and short hedged positions despite clients having no actual net market risk exposure. Shortcomings existed in disclosure of costs of keeping overnight open positions versus closing them, with insufficient consideration of potential foreseeable harm.

The FCA encourages all firms manufacturing or distributing CFDs to retail clients to consider these findings and address any gaps in their delivery of the fair price and value outcome.

European Parliament adopts resolution on impact of AI on financial sector

On 25 November 2025, the European Parliament adopted a resolution on the impact of AI on the financial sector.

An accompanying press release confirms that the resolution sets out the Parliament's priorities on using AI in the financial sector. Key points include:

• The European Parliament is concerned with the regulatory overlaps and interactions between the Artificial Intelligence Act (EU AI Act) and EU financial services legislation. The lack of sufficient guidance on interpreting these overlaps and interactions introduces undue complexity, compliance burdens and legal uncertainty. The European Commission and national supervisors are asked to identify and address any inconsistencies in the course of the EU AI Act's implementation and as part of the upcoming Digital Omnibus package.

• Calls on the Commission to issue clear, proportionate and practical guidance on the application of existing EU financial services legislation to the use of AI, rather than producing new legislation that adds complexity, uncertainty and risk.

• Consideration that reliance on the existing EU legislative framework requires continuous supervisory attention, effective enforcement and the clear allocation of responsibility for compliance. 

• Supervisors should co-operate better, through information-sharing and cross-border co-ordination. The Commission and supervisors should also strengthen co-operation with international partners to ensure the EU keeps pace and aligns with global regulatory developments.

• Calls on the Commission, the European Supervisory Authorities (ESAs) and national supervisors to assess the added value of AI-specific regulatory sandboxes, innovation hubs and cross-border testing environments for financial services.

In the press release, it is noted that this approach signals a significant policy shift toward the market from the Parliament, which has previously been considerably more sceptical of AI.

EBA Factsheet on AI Act – Implications for EU banking and payments sector

On 21 November 2025, the European Banking Authority (EBA) published a factsheet on the implications of the Artificial Intelligence Act ((EU) 2024/1689) (AI Act) for the EU banking and payments sector.

• Mapping exercise. In 2025, the EBA mapped the AI Act requirements on high-risk AI systems, with a focus on the use of AI for creditworthiness and credit scoring, against sectoral requirements within the EBA's scope. This includes the Capital Requirements Regulation (575/2013), the Consumer Credit Directive (2008/48/EC), the Mortgage Credit Directive (2014/17/EU) and the Payment Services Directive ((EU) 2015/2366).

• Key findings. The EBA found no significant contradictions between the AI Act and EU banking and payments legislation. The AI Act is complementary to EU banking and payments sector legislation, which already provides a comprehensive framework to manage risks, though some efforts may be required by banks and other financial institutions to integrate the two frameworks effectively. 

The co-existence of multiple authorities supervising financial entities' compliance highlights the importance of supervisory cooperation to ensure effective implementation of the AI Act.

The EBA has not identified any immediate need to introduce new or review existing EBA guidelines. In 2026/2027, the EBA will undertake specific activities to support the implementation of the AI Act in the EU banking and payments sector by promoting a common supervisory approach and supervisory cooperation amongst national competent authorities responsible for financial sector supervision and market surveillance authorities.

FCA partners with Singapore to drive growth and AI innovation

On 12 November 2025, the FCA announced a strategic partnership on AI with the Monetary Authority of Singapore. 

Key objectives of the partnership include:

• enable innovative firms in the UK and Singapore to scale and operate across markets more effectively

• champion safe and responsible AI innovation across UK and Singapore markets

• enable firms in both countries to grow through collaboration, gauge new cross-border opportunities, and shape the future of responsible AI innovation in finance

• enable joint testing of AI solutions, exchange of regulatory insights, and collaborative events to spotlight best-in-class approaches.

The partnership means, for the first time, the FCA will also establish a presence in Singapore with the appointment of an FCA Financial Services Attaché based at the British High Commission. This forms part of a wider plan to establish a presence other priority market next year.

ECON report on AI impact on the financial sector

On 11 November 2025, the European Parliament's Committee on Economic and Monetary Affairs (ECON) published a report containing a motion for a European Parliament Resolution on the impact of AI on the financial sector.

The report examines the use and impact of AI in the financial services sector and the regulatory landscape, providing policy recommendations to enable the use of AI in financial services and clarify regulatory overlaps. The report calls for the European Supervisory Authorities (ESAs) to adapt and monitor the increasing use of AI in financial services and mitigate risks for consumers whilst providing financial stability.

Key recommendations of the report focused on ensuring the responsible use of AI include:

• investment in Europe's venture capital scene as part of the Savings and Investments Union (SIU) to increase AI innovation

• clear and practical guidance to be developed by the European Commission in consultation with the ESAs and Member State competent authorities (NCAs) and stakeholders on the application of existing financial services legislation with regard to the use of AI

• simplification and consistency of the regulatory framework to avoid duplicated requirements including risk assessment reporting requirements and cautions against a one-size-fits-all approach

• call on the European Commission to explore how AI-driven tools can be used in financial markets such as in intermediation, portfolio management and compliance automation to contribute to the objectives of the SIU, which will require a technology-neutral regulatory framework

• removal of entry barriers by the European Commission and Member States within the EU for AI-driven innovative financial undertakings through streamlined licensing, cross-border scale-ups and inclusion in supervisory innovation hubs. 

The motion instructs the President to forward the resolution to the Council, the Commission and the governments and parliaments of Member States.

HM Treasury commissions AI skills needs report

On 5 November 2025, HM Treasury published a letter to the Financial Services Skills Commission (FSSC) from Lucy Rigby MP, Economic Secretary to the Treasury, commissioning the FSSC to research and produce a report on AI and other disruptive technologies.

HM Treasury sets out the following required components of the FSSC's research:

• an assessment of technologies that are expected to significantly impact financial services business practices, workforce and skills requirements over the next five to ten years

• an assessment of how these technologies will affect the sector's growth and productivity, and their impact on customers

• an assessment of the skills needed to successfully adopt and use these technologies

• a plan of how these required skills can be built. This should include consideration of the broader economic and fiscal picture

• where applicable, a cost-benefit analysis of the proposed measures.

The deadline for delivery of the final report to HM Treasury was set as mid-2027 under the growth and competitiveness strategy, although HM Treasury does not preclude earlier delivery if possible.

First list of critical ICT third-party providers published under DORA

On 18 November 2025, the European Supervisory Authorities (ESAs) published their first list of designated critical ICT third-party service providers (CTPPs) under the Regulation on digital operational resilience for the financial sector (DORA).

Designation as a CTPP results in enhanced regulatory scrutiny and direct oversight by the ESAs rather than the relevant national competent authorities (NCAs).

High Court upholds FCA decision to name firm in investigation announcement

On 23 October 2025, the High Court delivered its judgment in R (on the application of CIT) v Financial Conduct Authority [2025] EWHC 2869 (Admin). The Court considered the interpretation and application of chapter 4.1 of the FCA's Enforcement Guide (ENFG), which sets out when the FCA may announce investigations. This is the first challenge to the FCA's approach to publicising investigations since it published its updated version of ENFG in June 2025. 

For further detail, please see our article.

SFO guidance on evaluating corporate compliance programmes

On 26 November 2025, the Serious Fraud Office (SFO) published updated guidance on evaluating corporate compliance programmes.

Notable aspects of the guidance include:

• Six-context evaluation framework. The SFO will evaluate corporate compliance programmes across six distinct contexts: charging decisions, eligibility for deferred prosecution agreements (DPAs), terms of DPAs (including any monitor), the "adequate procedures" defence under section 7 of the Bribery Act 2010, the "reasonable procedures" defence under section 199 of the Economic Crime and Corporate Transparency Act 2023 (ECCTA), and sentencing. 

• Prosecutions and DPAs - ineffective programmes favour prosecution. An ineffective or non-existent compliance programme constitutes a public-interest factor in favour of prosecution. 

• Failure-to-Prevent offences - statutory defence requirements. Under section 7 of the Bribery Act 2010, the question is whether "adequate procedures" existed at the time of the bribe, assessed against the Ministry of Justice's six principles. 

• Sentencing considerations. At sentencing, the quality and effort behind compliance systems inform both culpability and harm assessments, including any "costs avoided" by failing to implement proper controls. 

• Substance over form. The SFO stresses that programmes must be more than a "paper exercise". They must be risk-based, proportionate, properly resourced, embedded in organisational culture and regularly reviewed. 

JMLSG AML Consultation

On 17 November 2025, the Joint Money Laundering Steering Group (JMLSG) launched a consultation on proposed amendments to Part I of its anti-money laundering (AML) and counter-terrorist financing (CTF) guidance for the financial services sector.

Notable aspects of the consultation include:

• Targeted amendments to two key chapters. The consultation proposes amendments to Chapter 3 (Nominated officer/MLRO) relating to guidance on monitoring the effectiveness of money laundering controls, and Chapter 6 (Suspicious activities, reporting and data protection) relating to guidance on data protection and subject access requests in scenarios where a suspicion report has been made. 

• Enhanced MLRO effectiveness monitoring. The proposed amendments to Chapter 3 indicate a strengthened focus on how nominated officers and Money Laundering Reporting Officers (MLROs) should monitor the effectiveness of their firms' money laundering controls. 

• Data protection and suspicious activity reporting interface. The amendments to Chapter 6 address the complex intersection between data protection obligations and suspicious activity reporting requirements. Specifically, the guidance covers scenarios where a suspicion report has been made and the firm subsequently receives a subject access request. 

The deadline for responses is 14 January 2026.

FCA multi-firm review of financial crime systems and controls

On 11 November 2025, the FCA published findings from a multi-firm review examining business-wide risk assessment (BWRA) and customer risk assessment (CRA) processes. The review forms part of the FCA's wider financial crime supervisory work.

The findings present examples of good and poor practice across the core aspects of effective risk management (see below).

Overview

The FCA evaluated controls against requirements in the SYSC sourcebook and the Money Laundering Regulations.

It also considered compliance with its Financial Crime Guide and guidance from the Joint Money Laundering Steering Group and Financial Action Task Force.

Good practice often exceeds minimum regulatory requirements.

Scope of review

The scope of firms reviewed was wide-ranging and included payments (e-money) firms, building societies, platforms, custody and fund services and wealth management firms.

The FCA conducted its review of BWRA and CRA processes through a questionnaire, desk-based review of policies and procedures as well as firm interviews.

Key findings

Identifying, understanding and assessing risk

• Most firms have a BWRA in place.

• Only a few firms are identifying relevant risks and tailoring the BWRA to their specific business.

• Some firms demonstrate how risk appetite, BWRA and CRA processes work together to identify and assess risk.

• The FCA is concerned that other firms cannot sufficiently explain how they are managing and mitigating identified risks.

Mitigating risk

• Financial crime risk is often considered in business strategy, growth and product development.

• Little evidence exists of how risk assessments, decision-making and monitoring activities are joined up.

• Some firms have a clear risk appetite closely linked to the BWRA.

• Very few firms have documented actions resulting from their risk assessments.

Managing risk

• Many firms recognise the importance of appropriate governance and oversight for risk awareness and thorough risk assessments.

• Senior management appear to better understand and be more aware of fraud risk than other financial crime risks.

• Some firms carry out limited or no testing and reviews of risk assessment processes when making enhancements, upgrades or implementing automation.

FCA expectations and next steps

• The FCA expects firms to already be complying with existing requirements.

• Where weaknesses were identified, the FCA is working with those firms to make improvements.

• Firms are encouraged to consider the findings and continue reviewing their risk-based approach to financial crime systems and controls.

• The FCA will continue to monitor firms through its supervisory work to make sure firms are considering the points raised in its review.

HM Treasury AML/CTF supervision regime consultation

On 6 November 2025, HM Treasury (HMT) launched a consultation on proposed reforms to the UK's anti-money laundering and counter-terrorist financing (AML/CTF) supervision regime. The consultation follows its announcement in October 2025 that the FCA will supervise all firms that carry out activities within scope of the Money Laundering Regulations (MLRs) as legal service providers, accountancy service providers, and trust and company service providers (see our November 2025 update).

The consultation outlines the FCA's proposed responsibilities, authorities and oversight frameworks required for the FCA to regulate professional services firms under the MLRs, together with the necessary statutory amendments to enact these changes.

Key proposals include:

• Registration powers. The FCA will register all relevant firms and have authority to approve, deny, suspend or cancel registrations, with minor amendments to align gatekeeping functions under the MLRs.

• Enforcement against unregistered firms. The FCA will identify and bring unregistered firms under MLR supervision, with a potential public register of all firms supervised by the FCA to be created to enhance transparency and prevent misconduct.

• Risk-based supervision. The FCA will apply a consistent risk assessment and targeted reviews across sectors, supported by inspections and information-sharing with authorities.

• Amendment to intervention powers. Minor amendments to supervisory powers enabling the FCA to issue directions to firms or require appointment of skilled persons for reviews.

• Guidance and support. Firms will receive current information on AML/CTF risks and effective MLR compliance through guidance from the FCA. 

• Intelligence-sharing. The FCA will share intelligence with law enforcement, other supervisors and relevant authorities, and support whistleblowing. HMT is also consulting on improving Suspicious Activity Report sharing between supervisors and the National Crime Agency.

• Enforcement powers. The FCA will have powers to impose civil and criminal penalties and public censures for MLR breaches, consistent with existing FCA powers and subject to judicial oversight.

• Funding. Supervisory activities will be funded through cost-recovery fees charged to supervised firms, aligned with current FCA practice. HM Treasure is providing Economic Crime Levy funding for implementation.

The FCA will remain operationally independent from HMT and political influence whilst remaining accountable to both HMT and Parliament.

The consultation closes on 24 December 2025.

The answer to last month's question: the FCA has estimated that the compensation that would be paid under its proposed motor finance consumer redress scheme if 85% of eligible consumers take part in the scheme would be £8.2 billion.

This month's question: which of the PSR's general directions requires participants and regulated persons to deal with the PSR in an open and cooperative way?

• General Direction 11

• General Direction 3

• General Direction 1

• General Direction 5.