Belfast Telegraph

RBS fined for breach of money laundering checks

By Russell Lynch

Royal Bank of Scotland has been fined £5.6m after lax controls put the banking group at risk of laundering money for terrorists.

The Financial Services Authority (FSA) said part-nationalised RBS and its NatWest, Ulster Bank and Coutts arms all failed to screen their customers and payments against the UK financial sanctions list between December 2007 and December 2008.

The breaches of money laundering regulations resulted in an "unacceptable" risk that the group could have carried out transactions involving sanctions targets, the FSA said.

Margaret Cole, the watchdog's director of enforcement and financial crime, said: "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, RBS left itself open to the risk that it was facilitating terrorist financing."

The risks were flagged up with the regulator by the new management after the bank was bailed out by the taxpayer in the autumn of 2008.

The group was the UK's largest processor of foreign payments during 2007 but it failed to screen any incoming payments to customers from overseas during the period.

It only screened outgoing sterling payments to US institutions and failed to screen any euro payments until June 2008.

Under the rules, banks must block all payments made to people on the Treasury financial sanctions list and inform its asset freezing unit.

The FSA's enforcement notice said a bank's failure to comply with its obligations can lead to "serious consequences".

"A breach of the regime may result in a criminal offence being committed, as well as leading to reputation damage to firms.

"In addition it carries the risk of criminal penalties being sought by the Government against the firm and, in certain circumstances, against the management of the firm."

A RBS spokesman said the FSA probe "confirmed the deficiencies we had identified" although it added that the regulator did not consider the bank's misconduct "deliberate or reckless".

He added: "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."

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