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Laundering lapses cost bond firm 170k penalty

The FSA has fined emerging market bond brokerage Inv- estment Services UK 175,0000 for failing to enforce money-laundering controls that allowed 8m to go into UK bank accounts without the bank knowing the identities of the people depositing the cash.

The firm has been found guilty of not fulfilling its money-laundering obligations and failing to run its business with due care and attention.

The firm’s managing director Ram Melwani has also been fined 30,000 personally for failing to ensure that the firm complied with the anti-money-laundering legislation. He is the first person to be fined individually for failing to comply with the legislation.

ISUK’s clients are corporate vehicles established for trading purposes and operated by non-resident, wealthy individuals. The vehicles are incorporated in offshore jurisdictions, some of which are deemed by the Government to have wea- ker money-laundering controls than the UK. For this reason, the FSA says these clients have a high-risk money-laundering profile.

The FSA says ISUK helped its clients to open accounts with a particular bank so they could participate in bond trades but it failed to provide the bank with the appropriate information about the account users to assess the risk to which it was exposed.

As a result of ISUK’s actions, a small number of individuals were able to operate anonymous bank accounts and the FSA says 8m entered the UK financial system without the bank knowing the identities or the source of their funds.

The FSA found that between 2001 and 2004 the firm did not have formal procedures for identifying individuals, did not provide AML training and did not apply to the FSA for approval of its money laundering reporting officer.

However, there is no evidence that any money laundering took place, nor did the FSA find that Melwani deliber- ately tried to mislead the bank.

FSA financial crime sector leader Philip Robinson says: “Senior managers are ultim- ately responsible for managing their firm’s risks. Where a firm fails to mitigate a high money-laundering risk, sanctions against senior management may follow.”


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