Bank AML breaches exposed in FSA fraud control review

One year on from the UK Financial Services Authority’s excoriating review of banks’ management of high money laundering risk situations [1], the regulator reports equally miserable failings in UK retail banks’ defences against investment fraud and discovers further severe anti-money laundering breaches.

Timon Molloy, Editor (timon.molloy@informa.com)

What gets measured gets done

UK consumers lose around UK£500m a year, FSA says, to a host of scams around share sales (boiler rooms), land banking, Ponzi and pyramid frauds as well as promised high returns on carbon credit certificates and unauthorised collective investment schemes. Yet, in a thematic review covering 80% of the British retail banking market [2] – seven banks and one building society – the regulator concludes “[I]n short, [that] senior management appeared to have little interest in the issue.” Unsurprisingly, this means that correspondingly little attention has been given to the problem: no bank “clearly reported” on investment fraud (whether by or against customers) to senior management, in contrast, FSA notes waspishly, to incidence of other sorts of fraud, “particularly where the bank was financially liable.” The majority claimed it was not a significant issue without offering any supporting evidence.