The 2026 Dear CEO letter: reading between the lines
The FCA has published its most detailed expectations to date for Annex I financial institutions. The letter escalates language on governance and management information, calibration and coverage of transaction monitoring rules, beneficial ownership evidence for corporate customers with layered offshore structures, and the treatment of Politically Exposed Persons under the revised Regulation 35. We unpack each theme and identify the specific artefacts a supervisor will now expect to see in a first meeting.
Governance and MI
The letter is explicit: boards must receive management information that translates SAR volume, alert throughput and remediation backlog into a picture of actual customer risk. Dashboards that report volume without interpretation will not satisfy the standard.
Expect supervisors to ask for the last four board packs and to test whether the MLRO's escalations were visible to non-executives.
Transaction monitoring
Rule calibration must be tested against the firm's own customer population, not left at vendor defaults. The FCA has repeatedly found rules whose thresholds were set at go-live and never revisited despite material changes in product mix.
Coverage gaps for correspondent and payment-in-transit activity are called out specifically.
Beneficial ownership
For corporates with layered offshore structures, the letter signals a lower tolerance for reliance on unverified self-declarations. Firms should expect requests for the corroborating documentation obtained at onboarding and refresh.
Regulation 35 PEPs
The distinction between domestic and foreign PEPs must be evidenced in the risk model, not just in policy. The FCA will look for calibration in the EDD requirement.