FSA Makes U-Turn Over Money Laundering Review

by Robin Pilgrim, LawAndTax-News.com, London

25 July 2003

The UK's Financial Services Authority (FSA) announced on Tuesday that it will not be introducing an industry-wide requirement for all financial services firms to undertake a review of the identities of their current customers, following a cost benefit analysis of the proposal undertaken by PricewaterhouseCoopers.

Explaining the regulator's decision not to go ahead with the mandatory review plans, FSA Managing Director, Carol Sergeant revealed that:

'We needed to be satisfied that any new general regulatory obligation would be proportionate to the benefits and would not be detrimental to the industry's competitiveness, nor unduly inconvenience customers.'

'This was a difficult decision but given the findings, across the whole of the regulated sector, of the cost benefit analysis, we could not be satisfied that a mandatory approach would be justified.'

In its place, Ms Sergeant announced, will be put a less onerous requirement for the management of financial services firms to satisfy themselves that their systems are appropriate for dealing with money laundering risks arising from inadequate identification of existing customers.

However, she added that:

'We take this opportunity to stress to all regulated firms that the need to identify your customer is an existing legal and regulatory obligation and considered by law enforcement agencies and the FSA to be an essential element of anti-money laundering controls.'

The PwC analysis showed that the cost for the UK's financial services industry would have been in the region of £174 million, had the FSA had forced each firm to undertake a structured, risk-based review with a fixed deadline.

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