In the spring of 2026, a lending concern called MFS collapsed, chiefly because it was found that it had used assets as multiple securities. That prompted FCA to take a much greater interest than ever before in its jurisdiction to require lenders (otherwise operating lawfully outside regulation) to register under the Money Laundering etc Regulations 2017. 

What has been happening

This started with the FCA calling upon about 600 already-registered entities to quiz them intensively on how they comply with the MLRs (or whether other companies in their groups should also be registered). And this has been followed up with a range of further probes. We have seen and been asked to advise on:

• Several instances of clients whose banks have written to them asking if they think they need registration (and if so, what they plan to do);
• At least one case of a firm that tried to apply itself (ie with no advisers to support it) which FCA had taken a dislike to; and
• One firm that had honestly never heard about the need to register, until it received a not very friendly letter from FCA telling it to stop business until it had managed to do so.

In-between, FCA published at the end of October the names of 6 firms - all applicants - against which it had secured a voluntary direction (“VDIR”) pressing them to cease business until their issues had been rectified. 

These are tricky times. FCA has no jurisdiction to regulate businesses involved in commercial lending. But it can use this theoretically lesser jurisdiction to pursue firms for substantial disclosures - and this is exactly what it has set out to do.  In worst case, if FCA decides that a firm is not competent to run an AML culture the meets regulatory standards, its intervention can close that firm down. It is sadly that simple.

Who is a lender?

All of this derives from Schedule 2 to the MLRs at para. 2  The list in Sch. 2 is of so-called Annex 1 Financial Institutions (referring to Annex 1 to the Capital Requirements Directive, a gift from the EU from not long prior to Brexit.  There are a lot of business types listed here but we are chiefly concerned with lending  

In principle, a “lender” for these purposes has to be acting by way of business, and those who borrow must be in a customer relationship either it.  This last precludes for example companies lending to each other intragroup.

But subject to this, those who lend in the increasingly prominent bridge finance industry are within scope. Matters get a bit more complex, though, if within a group of entities one originates while the loan is then parked on another (eg where that other takes a transfer or assignment if a loan for structural reasons). In the latter case FCA calls this an SPV and in that separate registration isn’t called for.  Whether this is precisely how a group is configured may depend on more complex analysis. 

What should you do if FCA writes to you?

First, don’t panic. If FCA or anyone else thinks you are actually laundering money or pampering terrorists, your interaction with the authorities will be a great deal rougher than this. You should seek legal advice and aim with the benefit of that advice to forestall any intervention (eg a VDIR or the requirement to pay for a skilled person’s report). Best is a letter from your lawyer to FCA that attempts to set the record straight, evidences a compliant if not necessarily a yet registered regime and advises that you are taking steps to speedily come fully into line. (Unless, of course, you have decided to close the business and then FCA likely won’t trouble you further.) Then, appoint a compliance consultant and start moving ahead with an application. Swiftly and as a priority.

In principle, the same applies with your bank, if the bank has pressed you for disclosure of your intentions.

Applications take a long time …

Sadly, yes. FCA is backlogged and we hear applicants are being told this will take 6-12 months (!) to process. However, it is clear from the MLRs that once your application is in, you can continue lending while it is still pending.

If you don’t need to apply, and you have had this confirmed by some source or another, get a lawyer to write to you to confirm this and explain the basis. You might need that letter in future.

A final word of warning

Take this seriously. FCA has powers to not register a firm it doesn’t like the look of. Although there are appeals from a refusal to register, they are disproportionately expensive and you should likely regard FCA intervention to close down an unregistered lender as final and decisive.