Or for ‘risking’ the integrity of UK financial services. (Really).
There’s some international criminal intrigue on Tuesday — the FSA has fined RBS for failing to prevent payments going to and from persons sanctioned by the UK government.
Oh dear. Not good for one of Her Majesty’s Banks.
From the FSA’s statement (emphasis ours):
UK firms are prohibited from providing financial services to persons on the HM Treasury sanctions list. The Money Laundering Regulations 2007 (the Regulations) require that firms maintain appropriate policies and procedures in order to prevent funds or financial services being made available to those on the sanctions list.
During 2007, RBSG processed the largest volume of foreign payments of any UK financial institution. However, between 15 December 2007 and 31 December 2008, RBS Plc, NatWest, Ulster Bank and Coutts and Co, which are all members of RBSG, failed to adequately screen both their customers, and the payments they made and received, against the sanctions list. This resulted in an unacceptable risk that RBSG could have facilitated transactions involving sanctions targets, including terrorist financing.
And oh look — another FSA Biggest Fine Ever™:
The FSA considers that RBSG’s failings in relation to its screening procedures were particularly serious because of the risk they posed to the integrity of the UK financial services sector. This is the biggest fine imposed by the FSA to date in pursuit of its financial crime objective. It is also the first fine imposed by the FSA under the Regulations.
RBS would have gotten a even bigger fine — £8m — but it won brownie points for settling at an early stage, the FSA said. Here’s FSA enforcement director Margaret Cole’s statement:
“The involvement of UK financial institutions in providing funds, economic resources or financial services to designated persons on the sanctions list undermines the integrity of the UK’s financial services sector. By failing to screen relevant customers and payments against the HM Treasury sanctions list, RBSG left itself open to the risk that it was facilitating terrorist financing.”
The name’s Cole. Margaret Cole.
Update – Here’s the response from Nathan Bostock, Head of Restructuring and Risk at RBS:
“We recognise the very important role the Group plays in supporting the UK’s financial sanctions regime and the importance of complying with legislation and regulation and implementing best practice.
“We acknowledge the findings of the FSA investigation. It confirmed the deficiencies we had identified and brought to their attention, in our policies, procedures and controls during the year to December 2008, though the FSA noted that it did not consider this misconduct deliberate or reckless. We have taken appropriate action to remedy these issues and continue to enhance our control environment with a view to ensuring a more robust sanctions compliance framework and ultimately that our detection and prevention capabilities are in line with best practice in the market.”
Related links:
Financial sanctions – HM Treasury
FSA fines JP Morgan record £33.2m – FT Alphaville
The terrorist model for banks – FT Alphaville