RBS Group fined £5.6m for sanctions control failings

UK regulator issues large fine after banks fail to implement monitoring systems

The Royal Bank of Scotland Group (RBSG), which includes RBS, Natwest, Ulster Bank and Coutts, has been fined £5.6 million by the UK Financial Services Authority (FSA) after the regulator argued it had failed to implement transaction monitoring.

The fine is the largest ever levied by the FSA in the area of financial crime and the first imposed by the regulator under the Money Laundering Regulations 2007, which require firms maintain policies and procedures to monitor transactions for money laundering.

The FSA claims in a statement that, as a result of failing to implement these structures, "RBSG could have facilitated transactions involving sanctions targets, including terrorist financing".

Tony Woodcock, a partner at law firm Stephenson Harwood, argues the size of the fine reflects the seriousness of the failing on the part of RBSG. "For these sorts of failures, there is always going to be a substantial fine," he says. "In this case they were certainly wide-ranging and fundamental, and the political and social significance is great. It is plainly right a failure to meet these important obligations is met both with a substantial penalty and publicity."

Over a period of a year, RBSG failed to screen transactions or customers against a list provided by the UK Treasury. The Treasury list specifies institutions, corporates and individuals with whom business cannot be conducted without a licence from the Treasury.

Woodcock says that this is part of an effort to fight financial crime that has been ongoing since the issue of the Money Laundering Regulations, and that the RBS Group is one of the first to be fined in relation to the issue of sanctions.

"Given the time it takes these investigations to come to fruition, it probably means RBSG and possibly others came under the spotlight shortly after that," he says. "There might be other investigations going on, and its part of the FSA's drive against financial crime, which might lead to penalties against institutions and individuals."

An FSA spokesperson says that, in calculating the size of the fine, the UK regulator "noted RBSG had approached the FSA when it became aware of the breach and had begun to retrospectively examine its customer databases".

No positive matches were subsequently found against the Treasury list. RBSG qualified for a 30% discount from an original fine of £8 million by agreeing to settle at an early stage of the FSA investigation.

In a statement, RBSG states it has since "taken appropriate action to remedy these issues and continue to enhance our control environment", and that it aims to be "in line with best practice in the market".