Bank Of Scotland Fined For Breaching UK Money Laundering Rules

by Robin Pilgrim, LawAndTax-News.com, London

21 January 2004

The UK's Financial Services Authority (FSA) announced late last week that it has fined the Bank of Scotland Plc (BoS) £1.25m for its failure to abide by the FSA's Money Laundering Rules.

In an investigation conducted by the UK regulator, weaknesses were discovered in BoS’s record keeping systems and controls across its retail, corporate and business banking divisions. In over half of the sample of accounts tested in late 2002, BoS had failed to retain either a copy of the customer identification evidence or a record of where this evidence could be obtained. These failings were made worse by BoS's inability to determine the areas in which the breakdown in its record keeping systems had occurred.

However, following the discovery of the failings, BoS promptly and effectively implemented a robust remedial action plan across the whole of the HBOS Group, a move which meant that compliance rates improved significantly from January 2003, and led the FSA to express satisfaction that the bank has dealt with the issue appropriately.

Speaking following the announcement of the fine on Thursday, director of enforcement at the FSA, Andrew Procter explained that:

“The FSA requires firms to maintain records of customer identification because these records are vital to the investigation, detection and prevention of financial crime. The records can help law enforcement agencies by identifying individuals involved in money laundering and linking them with criminal funds passing through the UK financial system."

He continued:

"The failure by Bank of Scotland to keep proper records of customer identification could have seriously undermined its ability to comply with the requirements of orders served by law enforcement agencies under the Proceeds of Crime Act."

"The size of the fine demonstrates that failure by firms to put in place and maintain effective systems and controls will be dealt with severely by the FSA. I note, however, that Bank of Scotland has taken prompt and effective remedial action to resolve this problem.”

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