The UK’s Financial Conduct Authority (FCA) says in a new report that it is disappointed to find continuing weaknesses in most small banks’ approach to anti-money laundering (AML).

The report, published on 14 November, follows a 2011 report by the now defunct Financial Services Authority (FSA) on the management of high money-laundering risk situations and the subsequent enforcement action and regulatory guidance.

Inadequate resources
“Given the amount of work we have carried out on AML in recent years, we were disappointed to find continuing weaknesses in most small banks’ AML systems and controls,” the FCA said in a statement.

A third of the banks it reviewed had inadequate resources, staff often had weak knowledge of money laundering risks, and some overseas banks struggled to reconcile their group policies with higher UK requirements were amongst the FCA’s findings.

Review scope
The report focuses on the banks’ approaches to politically exposed persons (PEPs), high-risk customers and correspondent banking.

The authority also considered the adequacy of financial sanctions systems and controls, where previous work by the FSA had found weaknesses.

Serious issues
The FCA found particularly serious issues at six banks. As a result, four banks voluntarily agreed to limit their business activities with certain types of high risk customers until they have corrected control weaknesses.

The authority has required three of these banks to appoint appropriately skilled staff while the other three banks are conducting remedial work under the guidance of external consultants.

The FCA says it has started enforcement investigations into two of the six banks.

The report on which this article is based can be found here: TR14/16 How small banks manage money laundering and sanctions risk: update

Categories: Trade Based Financial crimes News