FSA fines RBS for anti-money laundering control failings

The Financial Services Authority (FSA), the UK’s chief financial services watchdog, yesterday fined the Royal Bank of Scotland (RBS) £750,000 for breaching its anti-money laundering rules. It is the first time the FSA has issued a financial penalty for anti-money laundering control failings.

An FSA investigation that began in May this year found weaknesses in RBS’s anti-money laundering controls across its retail network. The FSA said RBS failed either to obtain sufficient know-your-customer (KYC) documentation, or to retain such documentation in a number of new accounts opened in early 2002.

FSA managing director Carol Sergeant said the fine was substantially lower than it could have been because RBS senior management dealt with the problems promptly and efficiently when they became aware of them, and because the bank had an “open and constructive approach” to the FSA investigation. Sergeant also said there was no evidence that money laundering had taken place.

RBS has now implemented group-wide monitoring of KYC compliance rates. This has caused the failure rate to fall significantly from April 2002 and the FSA is satisfied that the bank has dealt with the issue effectively.

The fine shows the FSA takes anti-money laundering compliance very seriously, Sergeant said. “We have made it clear that we expect all financial firms to have strong and effective anti-money laundering procedures in place and – equally importantly – to ensure that they are properly implemented,” Sergeant added.