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ModConnect July 2025

9 days ago by Victoria Maguire


Failure to Prevent Fraud - Effective 1 September

Reminder: The Failure to Prevent Fraud (FTPF) offense goes into effect 1 September 2025.

🔍 What This Means for You

  • In the coming weeks, Modulr will be sending you documentation to review and complete; and
  • As part of our ongoing refresh and/or audit activities, you will be required to provide documentation and information concerning your FTPF program.

For more information, you can access FTPF guidance here: FTPF Guidance to Organisations.

Changes to the Proceeds of Crime Act

🔍 What’s Changing?

The UK Government has enacted the Proceeds of Crime (Money Laundering) (Threshold Amount) (Amendment) Order 2025, which raises the financial threshold for certain exemptions under the Proceeds of Crime Act 2002 (POCA) from £1,000 to £3,000. This change comes into effect on 31 July 2025.

Transactions falling below the new £3,000 threshold may now be processed without requiring a Defence Against Money Laundering (DAML) request, provided no other risk indicators are present.

⚠️ Important Clarifications

  • This change does not affect the obligation to submit Suspicious Activity Reports (SARs).
  • The threshold amendment does not apply to terrorism-related offences under the Terrorism Act (DATF), which remain at a zero threshold.

📣 Next Steps
We encourage all partners to review their internal procedures and ensure relevant teams are briefed. If you have any questions or require support in adapting your controls, please reach out to your Partner Oversight contact.

New Sanctions Risk Alert: Shadow Fleet Evasion Tactics

🚨 Red Alert Issued – July 2025
The UK’s NCA has released a Red Alert (Ref: 0774-NECC) warning of sophisticated sanctions evasion tactics involving the maritime “shadow fleet” used to transport Russian oil and gas. Russian energy exports continue to fund the war in Ukraine, with 30% of Russia’s 2024 federal budget derived from oil and gas sales; the alert highlights how Russian oil traders are using complex corporate networks to evade sanctions and access Western financial and professional services.

🔍 Key Risks Identified

  • Use of complex ownership structures and front companies to obscure beneficial ownership.
  • Dual-network operations: a “blue” side engaging with Western financial systems and a “red” side operating through opaque, replaceable entities.
  • Direct links to sanctioned individuals and entities, including ROSNEFT and its affiliates.

💼 What You Should Do

  • Review your exposure to maritime trade finance, shipping insurance, and oil-related transactions.
  • Reassess your sanctions screening and due diligence processes, especially for counterparties in high-risk jurisdictions.
  • If you identify suspicious activity or potential breaches of sanctions, report immediately to OFSI ([email protected]) and consider submitting a Suspicious Activity Report (SAR) to the NCA, referencing 0774-NECC.

📘 Resources

  • The full Red Alert is available on the NCA website: Read the Alert
  • For SAR guidance, refer to the latest UKFIU SARs Reporter Booklet.

Updated FCA Guidance on Politically Exposed Persons (PEPs)

📘 What’s New?

On 15 July 2025, the FCA published its updated Finalised Guidance (FG25/3) on how firms should apply a proportionate and risk-based approach to UK PEPs, their relatives, and close associates for anti-money laundering (AML) purposes.

Key clarifications include:

  • Non-executive board members of UK civil service departments should not be treated as PEPs.
  • Local government officials, junior civil servants, and most military personnel are excluded from the PEP definition.
  • The default risk rating for UK-based PEPs and their associates should be lower than for non-domestic PEPs.

🔍 What This Means for You

  • UK customers who previously met the general PEP definition may no longer require PEP classification.
  • Where a UK customer still qualifies as a PEP, firms are expected to apply lower levels of Enhanced Due Diligence (EDD) unless other risk factors are present.
  • The guidance reinforces that EDD must still be applied, but in a proportionate manner.
  • Senior management approval remains necessary for establishing relationships with PEPs, and firms must assess whether a PEP exercises significant control over a legal entity.

📣 Next Steps
We encourage all partners to:

  • Review your internal PEP classification and due diligence procedures.
  • Ensure your teams are aware of the updated FCA expectations.
  • Reach out to your Partner Oversight contact if you need support implementing these changes.

For more information, you can access the FCA’s full guidance here: FG25/3: Treatment of Politically Exposed Persons.

2025 UK National Risk Assessment and European Banking Authority Risk Assessment Report Published

Critical updates:

The UK Government and the European Banking Authority have recently published updated 2025 risk assessments. These are critical reference material for any business operating in the regulated sector to review and assess.

Next steps:

  • All partners should complete a review of the relevant material (depending on the jurisdictions they operate in) and:
    • Ensure risk assessments/frameworks are reviewed, updated and any changes in the risk position are fully considered and actioned appropriately.
    • Ensure systems and controls are updated to mitigate any changes in risk position, and controls can evidence how they are being applied – this is specifically important for Transaction Monitoring and CDD controls.
    • Ensure your teams are aware of the updated key risk areas and emerging money laundering and terror financing trends identified.

For more information: you can access the full UK 2025 NRA Policy Paper here: 2025 NRA; and the full EBA 2025 Risk Assessment Report here: 2025 RAR.