15-Jan-2004: FSA fines Bank of Scotland Plc 1,250,000 for money laundering rule breaches

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The Financial Services Authority (FSA) today fined Bank of Scotland plc (BoS) 1,250,000 for failing to keep proper records of customer identification as required by the FSAs Money Laundering Rules.

Andrew Procter, FSA Director of Enforcement, said:

“The FSA requires firms to maintain records of customer identification because these records are vital to the investigation, detection and prevention of financial crime. The records can help law enforcement agencies by identifying individuals involved in money laundering and linking them with criminal funds passing through the UK financial system.

“The failure by Bank of Scotland to keep proper records of customer identification could have seriously undermined its ability to comply with the requirements of orders served by law enforcement agencies under the Proceeds of Crime Act.

“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. I note, however, that Bank of Scotland has taken prompt and effective remedial action to resolve this problem.”

The FSAs investigation confirmed weaknesses in BoS record keeping systems and controls across its retail, corporate and business banking divisions. In over half of the sample of accounts tested in late 2002, BoS had failed to retain either a copy of the customer identification evidence or a record of where this evidence could be obtained. These failings were made worse by BoS’ inability to determine the areas in which the breakdown in its record keeping systems had occurred.