The UK’s 2025 National Risk Assessment and proposed reforms to the Money Laundering Regulations signal a heightened regulatory focus on the asset management and alternative sectors. With the increasing complexity of fund structures and evolving financial crime typologies, compliance mature firms will reassess their risk frameworks to ensure they remain robust, transparent, and aligned with the FCA’s expectations.
1. National Risk Assessment (NRA) 2025:
The 2025 NRA identifies a range of emerging vulnerabilities in the asset management sector. A key concern is the increasing shift by mainstream asset managers toward private assets, which reduces transparency and obscures visibility into ultimate beneficial ownership. Within the alternatives space, while there is limited direct evidence of money laundering through UK-managed private funds and hedge funds, the sector remains exposed due to:
- complex and opaque investment structures;
- cross-jurisdictional group and fund arrangements; and
- diverse client profiles and service providers.
These characteristics limit the UK authorities’ ability to detect and disrupt illicit activity effectively. Criminals may exploit alternative investment funds, including private equity, private credit, venture capital, and property funds, to make substantial investments and later claim the gains as legitimate income. Funds with hard-to-value assets, opaque investments, and exposure to cryptoassets present a heightened risk. The sector’s perceived low risk, historic underinvestment in controls, and overreliance on third-party outsourcing may further incentivise misuse.
2. Money Laundering Regulations – proposed reforms:
The UK government’s consultation on Improving the Effectiveness of the Money Laundering Regulations (MLRs) proposes several key reforms:
- Making Customer Due Diligence more proportionate and risk-based.
- Clarifying the scope of MLRs for emerging business models.
- Enhancing supervisory coordination to reduce duplication.
- Reforming Trust Registration Service obligations.
These changes aim to streamline compliance while reinforcing the UK’s defences against financial crime.
3. FCA expectations & risk assessment implications:
The FCA expects all regulated and supervised firms to incorporate insights from the NRA into both business-wide and customer-specific financial crime risk assessments. This aligns with guidance in the FCA’s Financial Crime Guide.
As a regulated firm, now is a critical time to:
- review and update your business-wide risk assessments to reflect the latest NRA findings;
- ensure your monitoring systems (manual or automated) are calibrated to detect updated typologies;
- review your reliance on third-party outsourcing; and
- confirm that your governance and control frameworks are proportionate to the complexity and risk profile of your investment strategies.
At fscom, we are Compliance Maturity Specialists, with experts in financial crime solutions. We help financial services firms measure, master and maximise their compliance framework. If you need any assistance meeting the suggested FCA expectations, please do not hesitate to contact us.
Furthermore, we benchmark where firms are today against the regulatory requirements, their industry peers and most importantly, where they want to go next and how to get there. If you are interested in this service, a first step may be to take the 5-minute compliance maturity self-assessment today!
This post contains a general summary of advice and is not a complete or definitive statement of the law. Specific advice should be obtained where appropriate.
