The United Kingdom's Financial Services Authority (FSA) has fined Ulster-based Northern Bank for failing to adequately apply Know Your Customer rules to a number of new business accounts opened across its branch network between December 2001 and September 2002.
It is only the second time that the FSA has imposed such a sanction upon a bank, and the £1.25 million fine that Northern Bank has been forced to pay represents a record in this regard. The only other case of this type involved the Royal Bank of Scotland, which paid a £750,000 fine in December of last year. According to the FSA, the size of the fine also reflects the fact that the Belfast-based bank knew its KYC procedures had been lax, but took no immediate action to remedy the situation.
Know Your Customer, or KYC rules are designed to limit the opportunities for money to be laundered through the financial system, and in Northern Bank's case, this meant ensuring that certain identification documents, such as passport, driving licence and a utility bill were present and correct when a customer or prospective beneficial owner of a business account made an application. The bank is also required to keep copies of these documents on file for a period of five years.
"The FSA has made clear that we expect all financial firms to establish and maintain strong and effective anti-money laundering procedures," FSA Managing Director, Carol Sergeant announced in a statement, adding that: "Firms that fail to do this significantly increase the risk of criminals misusing the financial system to support their criminal activities as well as failing to meet their legal obligations to prevent money laundering."
"The size of the fine in this case reflects the prevalence of the breaches, Northern Bank's share of the market it operates in and its failure to take prompt and effective remedial action after it had originally identified its own failings," Sergeant concluded.
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