When I prepare a new training session, I always try to include a recent case study. Money laundering stories are easy to find; naughty people are forever committing crimes and then shifting the proceeds around. On the other hand, anti-money laundering stories – i.e. regulatory failures rather than criminal offences – are usually much rarer. But in the past weeks, I have been spoilt for choice. No sooner do I write one up than another one comes along, and most of them are thanks to the energy of the FSA here in the UK. (Apart from HSBC: for that one, we can say “¡Graçias!” to the Mexicans and “Way to go, bro!” to the Americans.)
In the last few months, we have had Coutts & Company on 23 March 2012, Habib Bank AG Zurich on 4 May 2012, and now Turkish Bank (UK) Limited on 26 July 2012. (I have written about the first two before in this blog – here for Coutts and here for Habib.) What is particularly interesting is how these banks have been chosen for the FSA’s special attention. The Coutts Final Notice said this: “The FSA conducted a thematic review of how banks operating in the UK were managing money laundering risk in higher risk situations. One area of focus for the review was how banks manage the risks arising from PEP and other high risk customers. In the course of the thematic review, the FSA visited Coutts in October 2010 to assess its AML systems and controls. The results of this visit gave serious cause for concern and a further short notice visit was carried out by the FSA to review a larger sample of PEP and other high risk customer files.” And the Turkish Bank Final Notice said this: “The FSA conducted a thematic review of how banks operating in the UK were managing money laundering risk in high risk situations. One area of focus for the review was how banks manage the risks arising from correspondent banking. In the course of the thematic review, the FSA visited Turkish Bank (UK) Limited in July 2010 to assess its AML systems and controls over high risk customers, wire transfers and correspondent banking. The results of this visit gave serious cause for concern in relation to the Firm’s AML controls over correspondent banking.” Can you see a pattern developing?
Let’s just look back at the FSA’s report on that thematic review, which was published in June 2011. In that report, the FSA said: “Our main conclusion is that around three quarters of banks in our sample, including the majority of major banks, are not always managing high-risk customers and PEP relationships effectively and must do more to ensure they are not used for money laundering.” During their fieldwork for the review, the FSA visited “eight major banks and 19 medium-sized and smaller banks”, giving a total of 27. If three-quarters of this sample had AML failings around high risk situations, that’s about twenty banks. Two down – eighteen to go?