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FSA clusters

Online broking and spread betting, two of the cluster projects in the FSA’s Money Laundering Theme, are non-face-to-face, principally execution-only activities. As such, there is less scope for firms to learn about customers’ wealth and normal trading patterns, which may mean that they are less certain of their identity. This proved to be the area of greatest concern during the regulator’s studies which found strong reliance on the Regulation 8 ‘postal concession’, ie, no additional proof of identity needed when payment is from an account at a UK bank or EU credit institution; it is electronic or posted; and the account opened does not permit third party payments - this concession is under review by HM Treasury. The regulator also noted low levels of both internal and external (to the National Criminal Intelligence Service) suspicious transaction reporting; none of the firms examined used automatic transaction monitoring software. On the positive side, the majority of firms would not accept cash with deals generally settled through cheques or direct debits from UK or EU bank accounts. They would either not pay funds to third parties or would do so only after conducting additional due diligence. Firms are struggling with the concept of a risk-based approach to money laundering and have adopted widely differing solutions. “We are giving these further thought,” said the FSA.