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FSA refers two banks to enforcement over high-risk customers

The FSA has referred two banks to its enforcement division after spotting a number of serious weaknesses in their systems and controls for managing high-risk customers.

In its paper, Banks’ management of high money-laundering risk situations, the regulator says that it is considering further action in relation to other banks and that further cases may be referred to the enforcement division. The FSA says that it found serious weaknesses in regards to a number of firms including its review of anti-money laundering risk-management.

The FSA says that a number of banks appeared unwilling to turn away, or exit, very profitable business relationships when there appeared to be an unacceptable risk of handling the proceeds of crime.

It says: “Around a third of banks, including the private banking arms of some major banking groups, appeared willing to accept very high risk levels of money-laundering risk if the immeadiate reputational and regulatory risk was acceptable.”

The FSA says a number of banks, particularly smaller banks, carried out inadequate due-diligence or none at all. The regulator says that around three quarters of banks, including a number of major institutions in its sample, are not always managing high-risk customers and PEP relationships effectively.

The FSA says that over half of the banks failed to apply meaningful enhanced due diligence in higher risk situations which then saw them fail to spot adverse information about the customer or the customer’s beneficial owner. It says a third of them failed dismissed allegations about the customers without adequate review.

It also says a third of banks failed to spot politically exposed persons, while three-quarters of the banks reviewed failed to take adequate measures to establish the legitimacy of the source of wealth and the source of funds to be used in the relationship.

Other concerns included some banks anti-money laundering risk-assessment frameworks not being robust enough; some banks failing to put significant safeguards in place to mitigate relationship managers having a conflict of interest and that a third of bank’s customer due-diligence was found to be inadequate and that some banks were unable to give them an overviewof their high risk and PEP customers easily. The FSA says nearly half the banks in its sample failed to review high risk or PEP relationships regularly.

The FSA says that given the nature of its findings, the management of high-risk customers – including politically exposed persons – is likely to remain a focus of its anti-financial crime work for some time to come


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There are 10 comments at the moment, we would love to hear your opinion too.

  1. The FSA have been busy today!

    I wish they would reply to my query. They promised they would reply to me within 48 hours. 7 days later, I am still waiting!!

  2. Ye gods – it’s taken them exactly HOW LONG to reach this position?? A blind and deaf monkey up a rotting gum tree in the middle of the wastelands should have been able to arrive at this view years ago.

  3. Bearing in mind the hoops IFAs have to jump through to process clients life cover for £10 per month, words like joke and mockery spring to mind. Twats, again !!

  4. And you are surprised ? Money talks and too many ‘little men’ in a sales mangement role didn’t have the balls to walk away from a client. They would rather hit their target for that month. The banks are at it again !!!!!

  5. They probably think that they have done enough to ruin the IFA industry and now have suddenly realised they are going to have to up their anti in fees and fines to be able to support the standard of living they have become accustomed to. I woul not mind being on an eighth of £800,000 plus pension ,plus exes plus chauffer driven car having paid all my fees and costs of running a business and of course keeping my clients happy.

  6. In the interests of ‘consumer protection’, wouldn’t it be a good idea if the FSA told the public which banks it is investigating? Or are they going to wait until the next banking crisis to then say – we had our eye on them?
    As someone who has waited years for the FSA to take action against a major bank for fraud, which includes money laundering, I fail to get excited by this latest news. If the FSA were serious they would have a) acted a long time ago on information received and b) realised there ‘market confidence’ is a completely untenable myth if consumers remain unprotected – and we are unprotected.

  7. If that had been an IFA or Mortgage Broker they would have been named. What do the FSA say “open and honest”

  8. Stable Door, Horse, Bolted…..

  9. Presumably these will turn out to be smaller banks where there is little chance of a plum job coming up in the future?

  10. I am fed up to the back teeth with the way the FSA conducts its business.Why bother announcing that they are referring two banks to its enforcement division if they are not going to name and shame them.They have referred two insurance companies to its enforcement division,I believe again without naming and shaming them.We have a right to know who these companies are and it is certainly not too much to expect transparency from a regulator.Do other European regulators operate in such a covert manner?

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