FCA launches Phase 1 AML Review of Annex 1 Firms – Questionnaire Issued
The FCA has commenced a new supervisory review of AML, CTF and CPF controls in Annex 1 firms, issuing a mandatory Phase 1 questionnaire to selected firms. This marks a shift from messaging and risk alerts into direct regulatory testing. Firms must submit their completed questionnaire by 1 December 2025 and must also confirm receipt of the FCA request within two working days.
Why the FCA is doing this
The FCA is testing whether Annex 1 firms have a proportionate financial crime control framework and whether they addressed the weaknesses set out in the March 2024 Dear CEO letter under the MLRs. This review is part of a more proactive FCA supervision strategy.
What Phase 1 involves
The Phase 1 questionnaire focuses on:
- Identification of inherent financial crime risk
- AML, CTF and CPF risk controls
- Governance oversight
- Customer due diligence
- Transaction and activity monitoring
- Suspicious activity escalation
- Independent review or testing arrangements
A number of firms completing Phase 1 will be selected for Phase 2, which will involve deeper supervisory scrutiny.
Deadlines firms must meet
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Confirm receipt of the FCA correspondence within two working days
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Submit the completed questionnaire by 1 December 2025
Failure to respond may lead to escalation or review of permissions.
This is follow-up to the March warning
As we warned Annex 1 firms in March, this is not a new development. It is the FCA now moving from advisory guidance to active supervisory intervention. Firms which treated the Dear CEO letter passively or assumed it was optional will now be required to demonstrate that improvements were actually made.
Why this matters
The difference between past messaging and this Phase 1 questionnaire is that firms must now evidence the controls they claim to have. It is no longer enough to have a policy or a framework “in draft” or “in progress”. The FCA is now testing control effectiveness, not just documentation readiness.
Contact us today to book a free consultation.
AuthoriPay is already assisting Annex 1 firms responding to this questionnaire. We are specialist AML regulatory consultants who have already handled FCA AML/CTF/CPF thematic reviews We can review or complete the return for you, assess your AML framework against FCA expectations, and help you avoid selection for Phase 2. Early support is far cheaper and simpler than dealing with escalated FCA supervision.
What Phase 2 could involve
Phase 2 is expected to include:
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Requests for supporting evidence
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Testing of onboarding and monitoring controls
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Methodology reviews of AML risk assessments
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Internal governance review
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SMF accountability checks
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Audit-style walkthroughs
Firms selected for Phase 2 will be expected to show maturity, not intention. At that stage, “we are working on improvements” is unlikely to satisfy the FCA.
What firms should do next
- Confirm receipt of the FCA request immediately
- Review your AML/CTF/CPF framework against known FCA weaknesses
- Gather documentary evidence of controls and remediation since March 2024
- Prepare supporting materials before completing the questionnaire
- Submit the final version by 1 December 2025
- Plug control gaps before the FCA asks for evidence
Support from AuthoriPay
AuthoriPay already supports multiple Annex 1 firms and can help with:
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Completing or reviewing the questionnaire
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Evidencing remediation since the Dear CEO letter
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Updating AML frameworks
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Preparing firms to avoid Phase 2 selection
Operational and governance weaknesses are easiest to fix now, not once under deeper supervision.
Further reading
We first warned firms earlier in the year that the FCA would escalate Annex 1 supervision. Our earlier guidance explains the risk trajectory already in motion.
Annex 1 Firm Questionnaire Phase 1 FAQs
Is this Phase 1 questionnaire optional?
No, it is a supervisory request under the MLRs.
Can this lead to enforcement?
Yes, if the FCA identifies weaknesses or poor governance.
What happens if a firm does not respond?
The FCA can escalate or review permissions.
Does every Annex 1 firm face the same risk?
Yes, The FCA is widening its perimeter and expects maturity from all firms.
Next Steps
If you have received the FCA questionnaire and want expert support preparing a complete and defensible response, or wish to avoid escalation into Phase 2, AuthoriPay can assist quickly and discreetly.
Contact us today to book a free consultation.
Below you can find the text of the letter Phase 1 Firms are receiving:
Financial Conduct Authority (FCA) Anti-Money Laundering (AML), Counter Terrorist Financing (CTF) and Counter Proliferation Financing (CPF) Supervisory Request
Dear Company
FAO: Nominated Officer
As part of the FCA’s proactive AML/CTF/CPF supervision strategy, we will be conducting a review of the financial crime risks, systems and controls of Annex 1 firms subject to the UK’s Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (as amended) (‘MLRs’). This includes reviewing Annex 1 firms’ anti-money laundering, counter-terrorist financing and counter-proliferation financing (“AML/CTF/CPF”) control frameworks to better understand their inherent exposure to money laundering, terrorist financing and proliferation financing risks, and the controls each firm has in place to identify and prevent them.
The FCA issued a Dear CEO letter to Annex 1 firms in March 2024 which requested that they undertake a gap analysis of their financial crime controls, based on the common weaknesses identified as a result of the FCA’s supervisory work. This current review may also include any follow up on action taken by your firm following the Dear CEO letter.
Your firm has been included in Phase 1 of our review and, therefore, selected to complete the questionnaire included in this email under ‘Actions Required’ below, under our supervisory request. The questionnaire mainly consists of multiple-choice questions and will help us to better understand the firm’s AML/CTF/CPF controls.
Following receipt and our review of the completed questionnaires from all the firms involved in this review, a number of these will be selected for Phase 2. Should your firm be selected for Phase 2, you will be notified in writing.
Your response to the questionnaire is due by Monday, 1st December 2025.
Timely submission is important, and we appreciate your attention to this request. If we do not receive a response by the deadline, please note that the FCA may consider further steps, which could include a review of your Firm’s permissions.
Actions Required
Please confirm receipt of this email within 2 working days. Please use this link (NB link redacted as it is personalised) to access the questionnaire and submit your completed responses by Monday, 1st December 2025.
Further guidance on completing the questionnaire is below.
Thank you in advance for your assistance with our review.
Guidance for Firms – AML/CTF/CPF Questionnaire
The questionnaire contains questions about your firm’s inherent risk exposure to money laundering, terrorist financing and proliferation financing and your control framework.
Please read through the guidance below carefully as this will help you to complete and submit the questionnaire successfully.
Instructions:
You must answer every question. You will not be able to move forward or submit the questionnaire where any of the answers are unanswered or details are missing.
The questionnaire has an ‘auto-save’ functionality. If you need to make any changes, please navigate using the back button on the bottom of the page.
By clicking submit at the end of the questionnaire, your responses will be submitted, and you will not be able to return to the questionnaire.
On submission, a summary of your responses will be displayed on screen with the option to save a copy for your records.
If you have any queries about how to complete this questionnaire, please contact the FCA’s Financial Crime Market Intervention (FCMI) team on FCSupervisoryInterventions@fca.org.uk.
If you have any questions about this letter, please visit the Contact Us page of the FCA Supervision Hub for ways to get in touch.
Yours sincerely,
Financial Crime Market Intervention team – FSI Team Annex 1 review