17-Dec-2002: FSA fines Royal Bank of Scotland Plc 750,000 for money laundering control failings

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The Financial Services Authority (FSA) today fined The Royal Bank of Scotland plc (RBS) 750,000 for breaches of its Money Laundering Rules. This is the first financial penalty levied by the FSA for money laundering control failings since the FSA acquired this power on 1 December 2001.

Carol Sergeant, Managing Director of the FSA, said:

“This fine demonstrates that the FSA takes anti-money laundering compliance very seriously indeed. The steps RBS took to satisfy itself that their clients really were who they claimed to be were inadequate. We have made clear that we expect all financial firms to have strong and effective anti-money laundering procedures in place and – equally importantly – to ensure that they are properly implemented. This requires firms to monitor the effectiveness of those procedures to ensure an appropriate standard of compliance. Firms that fail to do this lay themselves open to increased risks of being used for money laundering. “

“The good news in this case is the prompt and effective way in which the shortcomings were addressed once senior management became aware of them. As a result of this, and RBS’s open and constructive approach to the FSA’s investigation, the fine imposed is very substantially lower than it otherwise would have been. The other good news is that there is no evidence of actual money laundering having taken place. “

The FSAs investigation revealed weaknesses in RBSs anti-money laundering controls across its retail network. The investigation found that RBS failed either to obtain sufficient ‘know your customer’ (KYC) documentation adequately to establish customer identity, or to retain such documentation, in an unacceptable number of new accounts opened across its retail network in early 2002. There was insufficient evidence to show that the clients were who they had claimed to be, whilst in some cases RBS were unable to supply copies or details of the documents (such as a valid passport, a driving licence, a recent utility bill) it had used to verify identity. Examples of inadequate verification of identity are where the bank only verified a client’s name but not his address, or where the documents the bank obtained were not capable of verifying identity.

The breaches occurred despite increased regulatory emphasis on the importance of effective anti-money laundering controls in anticipation of the FSA’s new powers to make Rules relating to the prevention of money laundering which took effect from 1 December 2001.