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Laundry lapses cost Bank of Scotland £1.25m fine

The FSA has fined Bank of Scotland £1.25m for failing to keep proper records of customer identification for money-laundering rules.

An FSA investigation confirmed weaknesses in BoS&#39s record keeping systems and controls across its retail, corporate and business banking divisions.

The FSA says in over half the sample of accounts it tested in late 2002, BoS had not retained either a copy of the customer identification evidence or any documentation showing where this evidence could be found.

The regulator says that these failings were made worse by the bank&#39s inability to determine areas where the breakdown in its record-keeping systems had happened.

BoS says it accepts the FSA&#39s ruling that its storage and retrieval system for customer identification records was “not always in accordance with the appropriate money-laundering regulations”.

It says it regrets the error and is working with the FSA in the “fight against money laundering”.

FSA director of enforcement Andrew Procter says Bank of Scotland&#39s failure could have seriously undermined its ability to comply with the requirements of orders served by law enforcement agencies under the Proceeds of Crime Act.

BoS says that it initially detected the problem and contacted the FSA in December 2002 to report the matter. It asserts that remedies were put in place focusing particularly on improved document retention procedures developed to make sure that the problem would not happen again.

Procter says the failings occurred despite increased regulatory emphasis on the importance of effective anti-money laundering controls since the introduction of the FSA&#39s money laundering rules.

Procter says: “The size of the fine demonstrates that failure by firms to put in place and maintain effective systems and controls will be dealt with severely by the FSA.”

In a statement, the BoS says: “There is no evidence of any money laundering or of any Bank of Scotland customers having been adversely affected as a result of the problem.”


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