Decoding the FCA’s Dear CEO Letters

The Financial Conduct Authority (FCA) regularly issues Dear CEO letters, formal supervisory communications addressed to the chief executives and senior leadership of regulated firms.

These letters are far more than routine correspondence. They are a clear regulatory signal of the FCA’s current priorities, emerging risks, supervisory expectations and the common failings identified through thematic reviews and firm assessments.

For boards and senior management, Dear CEO letters should be treated as strategic documents. They highlight not only compliance concerns, but also broader expectations around governance, oversight, risk management and customer outcomes across the financial services sector.

Firms are expected to respond proactively, this may involve undertaking internal reviews, performing gap analyses, enhancing control frameworks and, in some cases, reporting back to the regulator on progress made.

One of the most significant recent supervisory themes has been the effectiveness of anti-money laundering (AML) frameworks and financial crime controls.

The FCA has identified recurring weaknesses across firms, including:

• Misalignment between registered business activities and actual operations
• Poorly documented or ineffective business-wide risk assessments
• Weaknesses in customer due diligence and ongoing monitoring processes
• Inadequate management information and board oversight
• Insufficient staff training and unclear governance responsibilities

In recent communications, the FCA has expected firms to conduct comprehensive gap analyses and ensure that senior management takes decisive action to remediate control weaknesses.

For many firms, this represents more than a compliance exercise, it requires a reassessment of governance structures, reporting lines and risk appetite frameworks.

In recent correspondence to payments and e-money firms, the FCA reiterated expectations around delivering three core outcomes:

• Effective competition and innovation that serves customers’ needs
• Protecting the integrity of the financial system, including robust financial crime controls and operational resilience
• Safeguarding customer funds and embedding Consumer Duty principles

The regulator has been clear that strong governance and active board oversight are fundamental to achieving these outcomes.

For asset managers and alternative investment firms, supervisory priorities have included:

• Implementation of regulatory reforms including developments linked to AIFMD
• Strengthening valuation processes and managing conflicts of interest
• Enhancing liquidity risk management and operational resilience
• Improving investor transparency and consumer outcomes in private markets

These communications reinforce the FCA’s expectation that firms adopt proportionate, tailored frameworks rather than relying on generic compliance models.