Two firms are facing enforcement action from the Financial Conduct Authority for anti-money laundering failures, while the regulator is reported to be considering similar action against three others.
Sharon Campbell, the FCA’s head of financial crime and intelligence, declined, predictably, to name the firms facing enforcement but stressed the issues were not new. The regulator, it is reported, is especially concerned with firms’ handling of high-risk customers such as politically exposed persons (PEPs).
“The thing that surprises me, when it boils down to it, the things we are finding are not new issues…the management of high-risk PEPs is not a new thing,” she told delegates at City & Financial’s financial crime conference on 4th March.
The FCA, previously the Financial Services Authority, has fined a total of nine banks in the past five years for AML failings, and much of the recent focus has been on firms’ handling of PEPs. In 2011 the regulator launched a scathing report on similar failings in this area.
The FCA is also concerned about the quality of AML compliance across the board and is worried firms are ‘de-risking’ their client bases to avoid proper compliance.
Campbell said she had found the failings “depressing” and said in one of the settled cases, a firm had an unemployed housewife as a client whose account had more than £1 million flowing through it over a period of time. “These are basic, simple principles,” she said. “The level of anti-money laundering compliance is a matter of concern.”
The regulator was worried the drive for profits was overriding the need to properly check high-risk clients. “Some firms are not willing to make tough decisions if profits are at stake,” she said, adding that some problems were serious and persistent.
Over the past year or so, many firms, as a result of the big fines imposed in the United States for serious AML failings, have started to quietly drop clients perceived as risky. This has become an issue in the UK and the FCA is concerned, Campbell said.
“If firms are taking that ‘de-risking’ strategy because of competition [issues] we will have something to say on it,” she said.
Delegates were told the FCA had a range of available options aside from enforcement. Last year it made six ‘early interventions’ in banks where it discovered serious weaknesses. The banks were told to remedy problems immediately. Campbell questioned why the FCA had to go in and find the problems, however. “We are not a consultancy,” she said.
Sharon Campbell's observations possess all the predictably dreary and complacent attitudes expressed by British financial regulatory agencies. She talks about 'a range of available options aside from enforcement'!
One of these days, Sharon Campbell and her bosses are going to wake up to the realisation that they are a law-enforcement authority, whether they like it or not!
They are not a kindergarten, or a bunch of social workers, their job is to apply and enforce the law as it pertains to the administration of financial services.
The trouble is that too often and for far too long, those charged with the administration of these laws, whether it was in the old days of the Securities and Investments Board, or its successor, the unlamented Financial Services Authority, or now its doppelganger, the Financial Conduct Authority, no-one inside these agencies has ever wanted to grasp the nettle of taking on board the responsibility for prosecuting those financial practitioners who willfully flout the law!
Howard Davies, former Chair of the FSA was described as having no appetite for prosecution, because, as it was described to me by an FSA staffer, '...he didn't want his reputation to suffer in the same way as that of Barbara Mills or George Staple..."
If the head of the regulatory body refuses to accept the powers that Parliament had prescribed for him, perhaps we should not be surprised if that policy became enshrined in the culture of the agency and its successors in title.
But just because one senior Mandarin Administrator didn't have the bottle to take up the challenge, doesn't mean that the FCA should renounce its responsibilities.
Sharon Campbell doesn't have any right to be depressed by the findings of her review, and she is right when she states,“...these are basic, simple principles..,” she said. “The level of anti-money laundering compliance is a matter of concern.”
So what are you and Tracy McDermott going to do about this wilful and deliberate refusal to obey the law. These firms are sticking two fingers up at you and you are doing nothing about it.
It is futile expecting banks and financial companies to worry about the arcane minutiae of the Money Laundering Regulations, all the time you succeed in giving them the impression that you don't care about this egregious activity.
You can preach to these bastards all you like and they will still ignore you.
These wilful failures to implement meaningful responses to the Anti Money Laundering Regulations possess penal sanctions, and these have now got to be imposed, with rigour.
This is a battle you people can win, if you really want to, but it's no good just hoping, you must take the fight to the enemy.
Any firm that has been under a compliance review and has still failed to take the necessary steps to implement the procedures and processes necessary to meet the legal requirements, should be summoned to court, and convicted.
And the buck should stop at the office of the Chief Executive. He or she should be told, by you, in no uncertain terms, where the failings were perceived to be, and what those failings were, and what steps you expected to be taken to rectify the matter, and a future date for a new inspection should be made.
Then if the processes were not completed, criminal proceedings should follow.
I am not expecting these men to go to prison in the first instance, although their wilful refusal to take the necessary degree of responsibility for preventing and forestalling money laundering is a serious matter, but any fines will be levied on them personally and will not fall upon the institution. The errant director will also now have a criminal record, which will directly impact his ability to be construed as a fit and proper person.
I guarantee you, Ms Campbell, that after the second such conviction, you will observe a gadarene-like rush for directors to be observed to be putting their houses in order.
You have no excuses any more. You must name and shame the institutions you have presently sanctioned, so that we all know which banks are refusing to accept their responsibilities under the law and are flouting your authority.
Such knowledge would have a big impact upon the investing public, it would have a direct impact on me, because I would be using that information to write to the Chairman of the bank, if my bank was among those named, and demanding that he do something to bring the bank into line!
Fining banks is a waste of time, why do you want to punish the shareholders?
On Thursday13th March, Thompson Reuters plc held a webinar which attracted over 1,000 interested practitioners from all over the world. The discussion focused on 'The Key Priorities for Customer Identification and Monitoring in 2014'.
It was very obvious that the basic client identification procedures and the need to monitor transactions is still an issue which the financial services world is still managing to ignore, despite all the rules and regulations applied for their enforcement.
This country is facing a tsunami of dirty money flooding into the City, particularly from Russia and the Ukraine. These two countries are among some of the most corrupt criminal states in the world, and their oligarchs are men who in so many cases have become wealthy beyond the dreams of avarice, by criminally looting the assets of the former Communist state.
George Osborne, David Cameron, and their London mayor mate, Bo-Jo may welcome this influx of dirty money, as far as I can tell, the Tories are very relaxed about the sources of criminal cash being deposited in the City, but it does no exonerate banks from ensuring the full implementation of the regulations demanding full due diligence on the sources and provenance of the funds being deposited, and the nature and quality of any PEPs seeking client status.
So, time to dig out the handcuffs, Sharon, and start arresting some of these banksters who seem to believe that they can continue to commit criminal offences without your agency having the guts to do something about it!