Community
NatWest has recently pleaded guilty to three counts of failing to comply with anti-money laundering (AML) legislation. The bank’s CEO Alison Rose said that the bank “failed to adequately monitor and therefore prevent money laundering by one of our customers between 2012 and 2016.”
This news will undoubtedly add to the disappointment expressed by industry regulator, the Financial Conduct Authority (FCA) in its missive to the CEOs of all UK Retail banks, which it sent this summer. It said although it had witnessed evidence of effective control measures, it was left disappointed to continue to identify some key weaknesses of some firms’ financial systems and control frameworks. These included governance and oversight, risk assessments, due diligence, transaction monitoring and suspicious activity reporting.
Failure to comply is significant
Banks are expected to adhere to regulations laid out in the amended Money Laundering and Terrorist Financing Regulations 2019. And failure to comply is significant, as NatWest is finding out. Not only can the banks suffer fiscally (significant fines) and reputationally (it doesn’t look great) but under the Senior Managers and Certification (SMCR) all senior management are responsible for their firms countering risk from financial crime and they can be held personally liable for infringements. The tone of the FCA letter implies ‘no more Mr Nice Guy’ – they will start to come down hard on banks who don’t now toe the line.
The FCA gave the banks the deadline of 17 September to conduct a gap analysis to identify specific weaknesses and areas of risk. And now they’re expected to put in place measures to address any weaknesses identified. Of course, one of the main problems in AML and regulations such as KYC (know your customer) is data quality. Firms’ controls and their adherence to AML is only as good as their data. So – broadly – what should firms be doing right now to improve their AML controls and address data issues?
Time will tell how well banks have sat up and listened to the ‘Dear CEO’ plea of the FCA. But they are running on borrowed time – the FCA will really start to come down hard on AML regulation breaches. After all, it’s in everyone’s interest to root out the financial criminals.
This content is provided by an external author without editing by Finextra. It expresses the views and opinions of the author.
Azimkhon Askarov Co-partner at CONCRYT
02 September
Edvards Margevics Co-partner at CONCRYT
30 August
Ellen Roberson Global Marketing Advisor, Risk, Fraud & Compliance at SAS
Patrick Bermingham CEO at Adflex
29 August
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