RBS fined heavily for failing to enforce Treasury blacklist

05 August 2010


The Financial Services Authority has imposed a GBP5.6 million fine on Royal Bank of Scotland for failing to make adequate checks on the identities of its customers.

The Money Laundering Regulations 2007 prohibit banks from supplying financial services or money to proscribed persons and organisations. To comply with this rule, all banks must install systems to automatically compare the names of their clients (and those they deal with) against a government blacklist.

This list includes 500 organisations and 1400 individuals, of which about 60 are UK resident. It is compiled by the Treasury’s Asset Freezing Unit from information supplied by the United Nations, European Union and various UK agencies.

The screening process is done by a method called “fuzzy matching”, which detects names that match, or nearly match, those on the list. But during 2008, says the FSA, RBS’s checking system did not do this adequately; about a quarter of near-matches that the system should have spotted in fact went unnoticed.

The bank also failed to keep consistent due-diligence records of the beneficial owner of its corporate customers, according to the FSA’s Decision Notice. Where it did have that information, it did not screen the individuals against the Treasury blacklist.

Banks must also monitor cross-border SWIFT payments, including all incoming payments to their customers, all Euro payments made by customers, and all sterling payments made by customers (except to US institutions; the US authorities already have direct access to all European financial transactions made via the SWIFT system.) Again RBS failed to do this until much later.

RBS – which also owns NatWest, Coutts, and Ulster Bank – is a key institution in the Treasury’s efforts against suspicious money transfers, as it processes more foreign payments than any other UK bank. In 2007 it processed GBP7.6 trillion of inward Euro payments and GBP8.6 trillion of outward Euro payments, with a total volume of 1.8 million payment transactions.

This was reflected in the size of the fine – the second largest fine ever imposed by the FSA, and the first under the 2007 regulations. Originally it was set at GBP8 million, but this was reduced by GBP2.4 million when RBS agreed to submit quickly and waived its right to an appeal. It has also remedied the defects in its systems.

The FSA’s full Decision Notice is worth reading to cast light on the technical measures the authorities use in their search for concealed money transfers.



Financial Services Authority (FSA)

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