FCA Reminds Firms About Unregulated Lenders and Annex 1 Firms

FCA News & Press Releases

Published March 20th, 2026

Detected March 21st, 2026

Summary

The FCA is reminding regulated firms to conduct thorough due diligence when dealing with unregulated lenders, safe custody providers, money brokers, and financial leasing companies, known as 'Annex 1' firms. These firms are registered solely for anti-money laundering purposes, and regulated firms must manage associated risks, including those detailed in the National Risk Assessment.

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What changed

The Financial Conduct Authority (FCA) has issued a notice reminding regulated firms of their obligation to perform adequate due diligence when engaging with 'Annex 1' firms, which include unregulated lenders, safe custody providers, money brokers, and financial leasing companies. These approximately 1,200 firms are registered only for anti-money laundering (AML) purposes and are not subject to the FCA's broader conduct rules or the Financial Ombudsman Service. The FCA emphasizes that regulated firms must verify registration status, conduct independent checks, and manage risks, referencing the 2025 National Risk Assessment and previous concerns raised with Annex 1 businesses regarding AML standards.

Regulated firms must proactively manage the risks associated with Annex 1 firms, particularly in light of instances where consumers have been directed to unregulated bridging finance. This requires understanding the firm's business and ensuring compliance with legislative requirements for due diligence. The notice highlights that consumers engaging with Annex 1 firms for services like unregulated bridging finance will not have access to the Financial Ombudsman Service if issues arise, underscoring the importance of clear communication and risk management for regulated entities.

What to do next

Review due diligence procedures for Annex 1 firms
Verify registration status of Annex 1 firms
Manage risks associated with Annex 1 firm engagements

Source document (simplified)

FCA highlights risks when dealing with unregulated lenders

Statements First published:

20/03/2026

Last updated: 20/03/2026
We are reminding regulated firms they need to undertake proper checks when dealing with unregulated lenders, safe custody providers, money brokers and financial leasing companies – also known as 'Annex 1' firms.

There are around 1,200 of these firms registered with us for solely anti-money laundering purposes. Our powers are currently limited to looking at how these firms are meeting their anti-money laundering obligations and they are not subject to our wider rulebook.

This regime is based on registration and is different from the authorisation regime under the Financial Services and Markets Act. For example, our wider conduct rules do not apply to these firms, nor are customers of Annex 1 firms able to access the Financial Ombudsman Service.

When dealing with Annex 1 firms, regulated firms must do their due diligence to understand the firm’s business, in accordance with legislative requirements. This would include seeking direct confirmation from the firm of their registration status, conducting independent checks of the information they provide, and understanding and managing any risks, for instance those detailed in the 2025 National Risk Assessment.

We raised concerns about anti-money laundering standards directly with the Annex 1 businesses in a letter to CEOs in 2024. We continued our proactive and reactive work in this area, which led us to follow up with 300 firms in late 2025.

We are aware of some cases where consumers have been encouraged to set up limited companies to access lending, such as unregulated bridging finance from Annex 1 firms. It is important these consumers understand they will not have access to the Financial Ombudsman Service if things go wrong.

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