FSA publishes letter detailing views on fighting money laundering

The letter stresses that the FSA is not an enforcement-led regulator, and that not only is zero failure impossible to achieve, but “aiming for it is the opposite of good regulation and a blueprint for fighting money laundering poorly”. The FSA recognises that some firms have concerns that if they follow a risk-based approach the authority might challenge their actions on the basis of hindsight and sanction them for any misjudgement, but if a firm demonstrates that it has put in place an effective system of controls that identifies and mitigates appropriately the risks that it is used for money laundering, enforcement action is very unlikely.

The FSA outlined three main expectations for firms, including that senior managers take the lead over AML, they assess where their risks lie and manage them appropriately and they have regard to the content of the JMSLG guidance in designing, implementing and monitoring their AML systems and controls.

The FSA predicts that only a small proportion of firms with weak AML controls will be subject to enforcement action, stating that “more commonly, weaknesses have been dealt with through informal discussions with supervisors, remedial action plans through the Arrow framework, or in some cases by issuing private warnings. Only where there is a significant or persistent failure in systems and controls do we consider enforcement action; such as when a firm has not taken adequate steps to identify its money laundering risks, not put in appropriate controls to mitigate those risks, or failed to take steps to ensure controls are being effectively implemented.”

BaselAlert.com