Kyte Ekstrom
7 Aug 2025
All the regulation you need to know to stay on top of your compliance 'A' game. Don't be complacent - be compliant. The latest regulation updates, news and amendments all summarised in a concise and clear way with accompanying links to relevant webpages and documents.
GENERAL
FCA publishes speech - Harnessing AI and technology
In her speech, Jessica Rusu set out the FCA’s commitment to using AI and technology to advance its 2025–2030 strategy, which focuses on being a smarter regulator, supporting growth, helping consumers navigate financial lives, and fighting financial crime.
Rusu reaffirmed that the FCA is both “tech positive” and “open for business”, stressing the importance of a collaborative approach with industry to position the UK as a global hub for responsible AI adoption in financial services.
FCA Speech - Harnessing AI and Technology
FCA publishes policy statement and further consultation paper - Tackling non-financial misconduct in financial services
The FCA has confirmed new rules and issued a further consultation aimed at tackling serious non-financial misconduct—including bullying, harassment, and violence—within all regulated firms. This follows the regulator’s earlier decision not to proceed with broader diversity and inclusion rulemaking, retaining only the proposals related to NFM.
Key Points:
Expansion of Conduct Rules to Non-Banks
New rules extend the FCA’s Code of Conduct (COCON) to include non-banking firms, ensuring that NFM is formally recognised as a matter of regulatory concern across all firm types.
Misconduct such as bullying, harassment, and violence will be treated as breaches of conduct rules, not just HR issues.
These rules will take effect from 1 September 2026, bringing non-banks into line with banks in terms of NFM expectations.
New Draft Guidance for Interpretation and Application
Chapter 3 of CP25/18 proposes:
New guidance in the COCON and FIT sourcebooks to help firms interpret rules around conduct and fitness and propriety.
Clarity on how to assess non-financial misconduct consistently under the Senior Managers and Certification Regime (SM&CR).
The guidance is designed to give greater certainty and consistency in applying expectations around behaviour.
Consultation on this guidance is open until 10 September 2025, with final regulatory decisions expected before the end of 2025.
What the FCA is NOT Changing
The FCA confirms it is not proceeding with proposed changes to:
Threshold Conditions (COND)
SYSC (Senior Management Arrangements, Systems and Controls)
It also confirms that existing regulatory reference rules under SYSC 22 are sufficient and will not be amended.
FOS publishes complaints data - Financial complaints hit a six-year high
On 2 July 2025, the Financial Ombudsman Service (FOS) published its annual data for 2024/25, revealing that financial complaints have hit a six-year high. 305,726 new complaints were received between 1 April 2024 and 31 March 2025, this marks a 54% increase from the previous year and the highest total since 2019.
Areas with record complaint levels include:
Motor finance commission
Fraud and scams
Credit card complaints
Unaffordable lending
The FOS highlighted that this surge in complaints is putting significant pressure on the redress system, particularly due to widespread concern about motor finance and lending practices.
The data reflects growing consumer dissatisfaction and scrutiny across the financial sector, with implications for firms’ complaint handling procedures, governance, and regulatory response readiness.
FOS - annual complaints data 24/25
Financial Ombudsman Service receives over 305,000 complaints in 2024/25
UK Russia regime sanctions – FCDO publishes guidance for non-UK businesses
The UK Foreign, Commonwealth and Development Office (FCDO) has issued new guidance to help non-UK businesses operating outside the UK understand and avoid circumvention of UK sanctions related to Russia. Non-UK firms, especially those with UK suppliers, clients, or banking relationships, may face serious commercial consequences if found in breach. FinTechs and financial institutions with international operations or clients in high-risk jurisdictions should review this guidance and assess exposure.
Sanctions Guidance - non UK businesses
FCA publishes second report - Secondary international competitiveness and growth objective
The FCA has published its second annual report outlining how it has supported its secondary objective to promote the international competitiveness and growth of the UK economy between July 2024 and July 2025.
The report details the FCA’s actions to enhance UK financial markets, reduce regulatory friction, and support innovation, in line with its role as a global financial regulator. The FCA confirms it has focused on creating a regulatory environment that attracts capital, supports innovation, and encourages long-term investment in the UK.
The FCA also released a letter addressed to the Chancellor of the Exchequer, explaining how it is aligning its activities with the government’s broader economic policy goals, particularly the six core aspects of its growth mission.
In a related press release, the FCA announced plans to consult later in 2025 on reforming its client categorisation rules. The aim is to unlock more investment opportunities for high-net-worth individuals and enhance access to capital markets, supporting both investor flexibility and market growth.
Secondary International Competitiveness and Growth Objective Report 2024/25
FCA Response Treasury Remit Letter
Secondary international competitiveness and growth objective (SICGO) metrics
FCA publishes finalised guidance - Treatment of PEPs for AML purposes
The FCA has published finalised guidance (FG25/3) on the treatment of Politically Exposed Persons (PEPs) under the UK Money Laundering Regulations (MLRs), updating its previous guidance (FG17/6) to reflect legislative and regulatory changes.
Key Points:
Non-executive board members of UK civil service departments should not be treated as PEPs, reducing unnecessary enhanced due diligence on low-risk individuals.
The FCA has made minor technical amendments to clarify who qualifies as a PEP under current UK legislation.
The guidance further explains how Money Laundering Reporting Officers (MLROs) should oversee the implementation and effectiveness of PEP controls within their firms.
The guidance should be read alongside the FCA’s July 2024 multi-firm review on PEP treatment, which identified inconsistencies and over-application of enhanced due diligence requirements.
Firms should now review their internal AML and CDD policies, particularly around low-risk domestic PEPs, to ensure alignment with this updated guidance.
FCA - Finalised Guidance - FG25/3
HM Treasury, PRA and FCA consult on reforms to the SM&CR
HM Treasury, the PRA, and the FCA have launched coordinated consultations on reforms to the Senior Managers and Certification Regime (SM&CR). The proposed changes follow earlier consultations in 2023 and are aimed at reducing regulatory burden, improving efficiency, and enabling more flexible oversight of senior management in financial services.
This is being proposed in a two-phase reform approach:
Phase One: within current legislation (FSMA)
Led by the PRA and FCA, this phase focuses on:
Streamlining the 12-week rule for interim appointments
Extending the validity of criminal record checks for SMF applications
Clarifying the scope of SMF7 (Group Entity Senior Manager), including a proposal to extend the definition to cover owners and controllers in certain dual-regulated firms
Phase Two: legislative reforms (HM Treasury)
HM Treasury proposes broader changes to amend the legal framework, which include:
Removing the certification regime from FSMA, giving the FCA and PRA the power to build a more flexible, proportionate certification framework
Reducing the number of SMFs that require pre-approval, increasing regulatory flexibility
These changes are intended to help reduce SM&CR-related burdens by 50%, aligning with the government’s growth and competitiveness agenda.
The consultation deadline is 7th October 2025. FCA and PRA aim to publish a policy statement by mid-2026
HM Treasury publishes consultation paper on review of the FOS
HM Treasury has published a consultation on reforming the Financial Ombudsman Service (FOS) following concerns that it has, in some cases, operated beyond its remit and contributed to regulatory uncertainty.
Key issues identified are as follows:
A lack of alignment between FCA regulatory expectations and FOS complaint decisions, creating a risk of the FOS acting as a “quasi-regulator.”
Challenges in handling mass redress events (MREs) and complex rule interpretation without clear FCA coordination.
Stakeholder concern that this uncertainty deters investment and innovation.
Proposed legislative reforms include:
Clarify the ‘fair and reasonable’ test – ensure FOS decisions reflect compliance with FCA rules.
Introduce formal referral mechanisms – require the FOS to seek FCA input where rule interpretation is unclear or cases have broader implications.
Enable firms or consumers to request referrals to the FCA on rule interpretation.
Give the FCA power to pause complaint handling during MREs without prior consultation.
Introduce a 10-year absolute time limit for bringing complaints, with limited exceptions.
The Consultation closes on the 8th October 2025. FCA and FOS have also published a joint consultation (CP25/22) on modernising the redress system. A new memorandum of understanding has been published to formalise FCA-FOS cooperation.
HM Treasury - review of FOS - consultation
HM Treasury - FS Sector Strategy: Review of the Financial Ombudsman Service
Memorandum of Understanding between the FCA and FOS
FCA and FOS publish joint consultation paper on modernising the redress system
The FCA and Financial Ombudsman Service (FOS) have published a joint consultation paper (CP25/22) proposing reforms to modernise the UK’s redress system, following feedback from their 2024 call for input.
Key Proposals Include:
Mass Redress Event (MRE) Framework:
Introduce a six-criteria framework to consistently assess and manage MREs (e.g. widespread harm or high redress costs).
SUP 15 Amendments:
Clarify when firms must report systemic or foreseeable harm issues to the FCA, aiming for earlier detection of redress concerns without increasing burdens.
Proactive Redress Guidance:
Seek views on best practices for identifying redress needs and clarifying FCA expectations for proactive remediation.
FOS Operational Changes:
Add a new complaint registration stage
Adjust delegated authority rules to improve case handling speed and consistency
Introduce a lead complaint process and referral mechanism for consistent regulatory interpretation
DISP and COMP Rule Updates:
Propose changes to improve efficiency at the FOS and Financial Services Compensation Scheme (FSCS).
The feedback deadline is the 8th October 2025. The finalised policy statement is expected to be published in early 2026
The proposals aim to improve predictability, coordination, and trust in the redress process for consumers and firms.
FCA - Consultation Paper - CP25/22
HM Treasury publishes consultation response - Improving the effectiveness of the MLRs
HM Treasury has published its consultation response on improving the effectiveness of the Money Laundering Regulations (MLRs) 2017, following a March 2024 consultation that received over 200 responses.
Key outcomes include:
Confirmed Regulatory Changes:
HM Treasury plans to amend the MLRs in several areas, including:
Enhanced due diligence (EDD) for complex transactions and high-risk third countries
Customer due diligence (CDD) requirements for pooled client accounts and certain non-financial firms
Customer onboarding procedures in bank insolvency situations
Non-Legislative Reforms:
Some issues raised will be addressed through updated sector guidance, in collaboration with AML supervisors, rather than legislation.
A draft statutory instrument will be published for technical comment in the coming months, with the intention to lay the legislation before Parliament later in 2025, subject to available time.
HM Treasury publishes fourth national risk assessment - Money laundering and terrorist financing
HM Treasury has published the 2025 National Risk Assessment (NRA) on money laundering and terrorist financing in the UK, updating the previous 2020 assessment.
Key developments include:
Increased global instability has heightened the overlap between money laundering, kleptocracy, and sanctions evasion.
Wider use of cryptoassets, e-money, and other financial technologies has introduced new risks and vulnerabilities.
Informal value transfer systems (e.g. underground banking and hawala networks) now pose a greater threat.
The National Crime Agency (NCA) and the FCA have published a complementary document outlining nine economic crime priorities for the UK’s regulated sector, aligned with the 2025 NRA findings.
These updates aim to inform the financial sector’s risk-based approach and strengthen national AML/CFT efforts.
HM Treasury - National Risk Assessment of Money Laundering and Terrorist Financing 2025
Proceeds of Crime (Money Laundering) (Threshold Amount) (Amendment) Order 2025
The Proceeds of Crime (Money Laundering) (Threshold Amount) (Amendment) Order 2025 (SI 2025/877) has been published, increasing the threshold for two key exemptions under the Proceeds of Crime Act 2002 from £1,000 to £3,000.
Key changes include:
The raised threshold applies to scenarios where a business:
Is operating a customer account, or
Is returning funds to end a business relationship, where criminal activity is suspected.
These exemptions allow firms to act without committing a money laundering offence, provided the amount involved is below the threshold.
The purpose of these changes are, to:
Free up law enforcement resources to focus on higher-value cases.
Reduce reporting burdens on businesses by lowering the need to file Suspicious Activity Reports (SARs) for low-value cases.
Minimise disruption for legitimate customers wrongly impacted by account freezes or investigations.
This change is aimed at enhancing the efficiency of the UK's anti-money laundering regime while reducing unnecessary friction for firms and customers.
UK Gov - Explanatory Memorandum
FCA publishes findings of multi-firm review - Design of digital loan processes
The FCA has published findings from a multi-firm review examining how consumer credit firms design their digital loan acquisition journeys (apps and websites), in the context of the Consumer Duty.
Key findings include:
Some firms’ digital processes lacked “positive friction”, such as helpful pauses or prompts that support informed decision-making.
Essential information, like loan costs, was often missing or difficult to access, impacting consumer understanding.
Harmful practices included:
Sludge: Unjustified friction that made better options harder to access.
Deceptive design: Interface features that steered consumers toward poorer decisions.
Although the findings focus on consumer credit, the FCA notes that the good and bad practices identified may be relevant to all firms with digital platforms.
This underscores the importance of user-centric, transparent, and fair design in digital financial services under the Consumer Duty.
The FCA has also released a research note highlighting how poor digital design can negatively affect consumer financial decisions.
PENSIONS & INVESTMENTS
FCA publishes consultation paper CP25/17 – Targeted support in pensions and investments
The FCA has expanded its proposals for targeted support to cover both pensions and retail investments, building on its December 2024 consultation (CP24/27). The aim is to offer more tailored, accessible guidance to consumers without triggering the full regulatory requirements of personalised financial advice.
Targeted support is a new, regulated form of help allowing firms to make specific, actionable recommendations to groups of consumers with similar needs (e.g. under-savers). It is designed to bridge the gap between basic information and full advice and aims to help consumers make better decisions than they would without any support.
Targeted support will be separately regulated from existing financial advice. A dedicated authorisation gateway and bespoke conduct standards will apply. HM Treasury will amend the Regulated Activities Order to define targeted support as a new specified activity, with details to be published alongside the Mansion House speech (15 July 2025).
Feedback deadline is 29th August 2025. The FCA expects to publish the finalised policy statement by the end of 2025. Further consultation on consequential changes is also planned later in 2025.
FCA - Consultation Paper CP25/17
CONSUMER CREDIT
HM Treasury publishes final statutory instrument and FCA publishes consultation paper - Buy-Now, Pay-Later
HM Treasury has published the final statutory instrument (SI 2025/859) bringing certain Buy-Now, Pay-Later (BNPL)products—defined as regulated deferred payment credit (DPC) agreements—into the scope of regulation from 15 July 2026. A temporary permissions regime (TPR) has also been established for firms applying for FCA authorisation.
Following this, the FCA published consultation paper CP25/23, outlining its proposed regulatory approach, including:
Disclosure obligations before and during a DPC agreement
Application of creditworthiness rules
Extension of the Senior Managers and Certification Regime (SM&CR) to DPC firms
Access for consumers to the Financial Ombudsman Service
Registration for the TPR will open two months before 15 July 2026, and feedback on CP25/23 is invited by 26 September 2026, ahead of final rules being published in early 2026.
FCA - Consultation Paper - CP25/23
UK Gov - Explanatory Memorandum
UK Gov - Statutory Instruments
MORTGAGES
FCA Mortgage Rule Review – Final Rules Published (PS25/11)
The FCA has published final rules (PS25/11) to simplify certain responsible lending and mortgage advice requirements, aiming to make interactions between firms and customers more flexible. The rules, described as permissive, took effect immediately on 22 July 2025.
Key Changes:
Removed trigger for advice: Firms speaking with customers no longer automatically trigger regulated advice under MCOB 4.8A7R(3), allowing easier customer interactions.
No full affordability check: When a customer wants to reduce their mortgage term, firms are no longer required to conduct a full affordability assessment.
Modified affordability: Now applies to new mortgage contracts with new lenders if the deal is more affordable than the customer's current mortgage or a comparable deal from their existing lender.
These changes followed a May 2025 consultation (CP25/11). The FCA’s broader discussion paper on the future of the mortgage market (DP25/2) remains open for feedback until 19 September 2025.
FCA - Policy Statement - PS25/11