If your firm lends commercially, provides financial leasing, guarantees, money broking or safekeeping, and is not authorised under FSMA, it is probably an Annex 1 financial institution - and it must be registered with the FCA for supervision under the Money Laundering Regulations 2017.
Registration is not a formality. The FCA has applied markedly increased scrutiny to Annex 1 firms since 2024, and rejects applications outright on grounds that have nothing to do with the merits of the business. We prepare and project-manage the whole application, then put the risk assessments, policies and MLRO arrangements in place so the firm is compliant from day one.
B2B lending, bridging and other Annex 1 firms have specific MLR obligations. We handle them so you can focus on lending.
Commercial, bridging and development lenders that are financial institutions under the MLRs. The largest group of Annex 1 registrations we handle.
Firms carrying out a Schedule 2 activity as a business in the UK that must register with the FCA for AML supervision.
Financial leasing, guarantees and commitments, money broking, portfolio advice and safekeeping - all within scope of the Money Laundering Regulations.
An Annex 1 firm - properly, an Annex 1 financial institution - is a business that carries on one or more of the activities listed in Schedule 2 to the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017, as a business in the UK, and is not otherwise authorised under the Financial Services and Markets Act 2000.
The name comes from Annex 1 to the Capital Requirements Directive, which is where that list of activities originates. Because these firms sit outside FSMA authorisation, they would otherwise fall outside the anti-money-laundering supervisory net altogether - so the MLRs bring them in, and the FCA supervises them for AML purposes only.
That distinction matters more than firms expect: an Annex 1 firm is registered, not authorised.
These are the activities as they appear on the FCA's own application form. A firm ticks every one that applies.
In practice the great majority of Annex 1 registrations we handle are lending firms - bridging lenders, development finance, commercial and B2B lenders - followed by financial leasing and guarantees.
State the activity precisely. The registered activity has to match what the firm actually does. A mismatch between the ticked box, the business plan and the reality of the lending is one of the fastest routes to a follow-up information request.
First, is the activity carried on as a business in the UK? The FCA looks at whether there is a commercial element and a commercial benefit, whether the activity is relevant to the firm's other activities, how regular and frequent it is, and whether there is a UK office or UK activity. An occasional one-off loan between connected companies is a different thing from a lending business.
Second, is the firm outside FSMA authorisation? Annex 1 registration is premised on the activity being unregulated. A lender doing regulated mortgage lending or regulated consumer credit needs FCA Part 4A authorisation - not Annex 1 registration, and not both by default.
A point that catches special purpose vehicles. Where lending is done through an SPV, the SPV registers only if it is the original lender. Groups routinely get this the wrong way round, either registering entities that do not need it or leaving the actual lender of record unregistered.
The two are routinely confused, and the difference changes what the FCA assesses and what the firm has to hold.
| Annex 1 registration | FCA authorisation (Part 4A) | |
|---|---|---|
| What it covers | AML supervision under the MLRs only | Permission for a regulated activity |
| What the FCA assesses | Whether you can comply with the MLRs | Threshold conditions, business model, capital, conduct |
| Prudential capital requirement | None | Yes, depending on permission |
| Conduct rules and SM&CR | No | Yes |
| Typical firms | Bridging and commercial lenders, financial leasing | Fund managers, advisers, consumer credit lenders |
The most common misconception we correct: there is no FCA prudential capital requirement for an Annex 1 firm. Business plans that claim to meet an FCA capital requirement misdescribe the regime, and the FCA notices.
Because it concluded the sector was a financial-crime risk that had been under-supervised.
The FCA wrote to Annex 1 firms in March 2024 setting out common failings, and has since run a sector-wide information-gathering exercise - after contacting around 300 firms in late 2025, it issued an information request to roughly 900 more, so effectively every registered Annex 1 firm has now been contacted.
Firms lean on their parent's controls. Group-owned firms rely on the parent's financial crime framework instead of assessing what their own business actually needs. The FCA's position is that each individual firm within a group must assess whether those controls are appropriate for it.
Unregulated lending through complex structures. The FCA has been explicit about risks from lending conducted through complex structures, including special purpose vehicles.
The practical consequence is stated plainly on the FCA's own page: Annex 1 lending firms should expect applications to take longer than usual to determine. A generic application will not survive this environment.
A complete pack is far more than the form. The Regulatory Business Plan needs a genuine regulatory perimeter analysis - not an assertion that the lending is unregulated, but an analysis of why it falls outside regulated mortgage lending, outside electronic lending platforms, outside deposit-taking and outside the collective investment scheme definition.
One trap worth knowing. A beneficial owner under Regulation 5 holds more than 25% of shares or voting rights. Four equal 25% shareholders therefore produce no beneficial owner on the shareholding limb at all. They should be captured on the joint-control limb, with that basis stated in the application. Getting this wrong means missing MLR Individual forms - an automatic rejection trigger.
The FCA issues substantially the same eleven questions after almost every Annex 1 application, even where a full bundle was supplied. Answering them before they are asked removes an entire round of delay.
We submit the answers as a cover note with the application. It is one of the clearest signals of a well-prepared pack.
The FCA publishes five grounds on which it rejects applications before assessing the merits at all.
Beyond those, the failures we see most often are: generic off-the-shelf documentation that is not proportionate to the firm; no perimeter analysis; borrower scope that is inconsistent between documents; capital-adequacy claims that misdescribe the Annex 1 position; a risk assessment with no visible methodology or with control failings scored as inherent risks; a customer risk assessment that assigns one risk level to an entire group; generic transaction-monitoring red flags; sanctions screening limited to the UK list; and documents left undated, unapproved or in draft.
On resubmission, one rule matters above all others. The FCA will reject a re-application that resubmits the same information without addressing its previous concerns. Any resubmission needs a cover letter mapping each prior FCA point to the document and section that now resolves it.
Paid through FCA Connect at submission, and non-refundable. Paying the wrong amount, or not paying at submission, is one of the five grounds on which the FCA rejects an application outright.
Depending on complexity. Covers the Regulatory Business Plan and perimeter analysis, the Business-Wide Risk Assessment, the Customer Risk Assessment, the full policy suite, the MLR Individual forms and the cover note answering the FCA's eleven standard questions.
What moves a firm within that range is structural complexity - group ownership, funder and participation arrangements, SPVs, and the number of MLR Individuals - rather than the size of the loan book.
In our experience a well-prepared application is usually determined in around two to four months. The FCA has said publicly that Annex 1 lending firms should expect applications to take longer than usual given its increased scrutiny of the sector, so this is an indication from our own casework rather than a guarantee.
The single biggest variable is not the FCA. It is whether the pack answers the eleven standard questions up front, or triggers a round of information requests.
Registration is the start, not the end. We help you meet your ongoing obligations under the Money Laundering Regulations 2017, from your FCA Annex 1 registration through to your annual compliance report and audits - including MLRO support, AML and KYC screening and AML training.
Book a free 30-minute consultation to discuss your authorisation, fund launch or ongoing compliance. No obligation, just expert guidance.
