Prudential Regulation Authority (PRA) definition and meaning | AML glossary
Prudential Regulation Authority (PRA) definition: What it means in AML compliance.
The Prudential Regulation Authority (PRA) is a key financial services regulator in the UK. Operating as part of the Bank of England, the PRA is responsible for the prudential regulation and supervision of banks, building societies, credit unions, insurers, and major investment firms.
Its core aim is to ensure the safety and soundness of the firms it supervises, thereby contributing to the stability of the UK’s financial system. While the Financial Conduct Authority (FCA) oversees conduct and consumer protection, the PRA focuses on risk, resilience, and ensuring that regulated firms hold sufficient capital and liquidity to meet their obligations – particularly in times of financial stress.
Key responsibilities of the Prudential Regulation Authority.
- Supervision of systemically important firms to prevent risks to the wider financial system.
- Setting and enforcing prudential standards, including capital requirements, risk management, and governance.
- Ensuring insurers can meet policyholder claims even under extreme conditions.
- Approving new financial firms and assessing their ability to meet prudential requirements.
- Intervening early if a firm shows signs of weakness, using powers such as restrictions, business wind-downs, or requiring capital injections.
Prudential Regulation Authority and Anti-Money Laundering.
While the PRA is not an AML regulator in the same way as the FCA, it does expect regulated firms to maintain robust risk controls that overlap with AML practices – especially in areas where financial crime poses a threat to a firm’s stability. Poor AML controls can lead to regulatory action if they result in capital, liquidity, or reputational risks.
Enforcement and penalties.
The PRA has the authority to impose significant financial penalties and sanctions on firms and individuals for breaching prudential regulations. Fines have been issued for failures in governance, capital adequacy, and risk management frameworks.
- In 2023, a UK bank was fined jointly by the PRA and FCA for failing to properly oversee its risk controls, with the PRA portion of the fine exceeding £30 million.
- The PRA also frequently issues Section 166 reports (skilled person reviews) to investigate firms’ practices more deeply.
How technology helps with Prudential Regulation Authority compliance.
Technology can play a central role in helping regulated firms meet their PRA obligations. Automated platforms can improve visibility into financial and operational risk by providing structured, auditable data that aligns with PRA reporting requirements. Centralised systems also help track changes in customer risk profiles, governance structures, and operational processes – ensuring a firm maintains a strong compliance posture. While technology cannot remove the regulatory burden, it can significantly reduce manual error, enhance oversight, and provide a clear trail for audits and inspections.
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