FCA Skilled Person Reviews: A Wake-Up Call for Annex 1 Financial Institutions

The FCA have published summary of the 2025/26 Skilled Person reports. A skilled person report is a supervisory tool that the FCA can employ under Section 166 of the Financial Services and Markets Act 2000 when the FCA have identified concerns within a firm. The report gives an independent review of the specific areas of concern, and it is conducted by a third-party ‘skilled person’. An S166 review is typically hugely demanding, both in terms of the cost of the skilled person’s services (which are paid by the firm) as well as the required investment of time and resources to enable the skilled person to conduct their review.

The data shows in 2025/26 the skilled person power was used in 31 cases, covering the range of markets supervised by FCA including consumer investments and wholesale markets. The Insurance and Wholesale buy-side markets had the most skilled person reports commissioned in 2025/26. Additionally, 12 out of the 31 cases were related to -Financial crime, followed by controls and risk management frameworks at 8 reviews. Notably, 31 cases is a 35% increase from 2024/25 (with 48 reviews).  

Interestingly, in the 2025/26 period, an Annex 1 Financial Institution has had a skilled person’s review conducted on its financial crime controls. This is atypical of the usual firms targeted under Section 166. These Annex 1 entities are supervised for anti-money laundering purposes by the FCA, typically when carrying out lending and commercial finance (where not directly regulated by the FCA).

While we haven’t seen it before, we shouldn’t be surprised FCA have used this power for an Annex 1 firm. FCA have made their concerns clear in previous publications such as the March 2024 'Dear CEO letter' (which set out the FCA's findings on how Annex 1 firms were complying with money laundering regulations) and more recent reviews of such firms (following the widely reported failure of an Annex 1 firm, Market Financial Solutions Limited) . Given this, we will no doubt see some updated guidance in the short term.

Anyone classified as an Annex 1 Financial institution and thus caught by these regulations should take this as another warning to review and assess their compliance with Financial Crime requirements, as the FCA sets a high standard.

Please contact us to discuss how we can help support your firm in navigating this increasingly challenging regulatory landscape.