The UK regulator is moving to tighten oversight of unregulated lenders after the collapse of Market Financial Solutions. It plans to request more information about business models and financial‑crime risks from about 900 companies classified as Annex 1 firms. The failure of MFS left creditors with a £1.3bn shortfall, with £250mn unaccounted for amid fraud allegations against owner Paresh Raja, who denies any wrongdoing.

The collapse raised concerns about lax underwriting standards and the exposure of consumers who are encouraged to set up their own businesses to access financing such as bridging loans. Steve Smart, FCA executive director of enforcement and market oversight, said the regulator will challenge how these firms operate, where their risks lie, and how those risks are managed. The FCA worries that some unregulated companies rely too heavily on parent‑company controls or generic procedures, and that complex structures can hide illicit activity.

The regulator will use data from the remaining 900 Annex 1 firms to identify and disrupt financial‑crime risks, warning that registration will face longer scrutiny. The crackdown aims to protect consumers and markets from fraud and money‑laundering via unregulated lending channels.