Salutary reminders about money laundering - as if any were needed

Decided court cases under the Proceeds of Crime Act 2002 may as yet be thin on the ground but the clutch of Financial Services Authority’s regulatory enforcement actions in the money laundering field is growing. After penalties for anti-money laundering (AML) failings at the Royal Bank of Scotland in late 2002 and Northern Bank earlier in 2003, December brought a fine of £2 million against Abbey National plc for money laundering sourcebook breaches, which Andrew Procter, FSA Director of Enforcement, said “demonstrated a marked lack of regard for its regulatory obligations.” The FSA investigation revealed that from December 2001 to April 2003 Abbey National failed adequately to monitor AML compliance across its retail banking operation: it relied on monthly self-certification by branch managers that, among other aspects of operational risk, AML legal and regulatory requirements had been fulfilled – external advisors noted that this approach posed a potential conflict of interest since the bonuses of staff completing the certificates could depend on the content of their reports; AML oversight by a central control function or Group Internal Audit (GIA) was lacking; and the MLRO was not supplied with sufficient management information to determine if the branch network was compliant with the ML sourcebook and the Money Laundering Regulations 1993. As a result, know your customer (KYC) deficiencies continued until April 2003: it was in March 2003 that the GIA discovered non-compliance rates of 32% for identification of new customers. The FSA also learnt that internal suspicious transaction reports (STRs) filed on customer transactions during 2002 were not reported promptly to the National Criminal Intelligence Service (NCIS). The Final Notice states that “over half [58%] were submitted more than 30 days after they had been reported internally to the central MLRO function with the last one not submitted until October 2003.”