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?
Hello Susan. Here’s a thought.
If, as you say, the FSA is finding a number of banks with shortcomings in AML controls and also a number of United States banks are being crticised (HSBC, Wachovia, Citibank), then, at what stage do FATF begin to take an interest at the jurisdiction level and criticise these two countries as AML deficient.
The FATF may of course be looking more at the legal framework etc, but the end result is the same. Even if the legal framework is fully covering the FATF objectives, there is a greater risk of money laundering in the jurisdiction if the bank’s do not effectively apply whatever they are legally mandated to do.
A very interesting extrapolation. I think we’ve all long thought that it is strange that the US never appears on any ML high risk lists, but perhaps you are right: the UK is starting to demonstrate that having the legislation is useless without compliance, and a strong means to punish (preferably through the criminal route, with its stronger penalties) any non-compliance.
Best wishes from Susan
PS I was taught that in blog-etiquette it is polite always to reply to every comment. But sometimes I worry that it just looks as though I want the last word. What do others think?
Never even thought about “blog -etiquette.” Don’t worry – as far as I am concerned it is a conversation which comes to a natural end. Not at all a question of having the final word,
I’m still having some fun with the way my PC is formatting your site pages so I hope this comment ends up in the right place !!
On the blog-etiquette point, I definitely prefer your polite and friendly approach of responding to each comment. The blog content is already excellent but I think the following up of comments also helps to add an extra dimension and hopefully encourages people to get involved.
It certainly doesn’t come across as “last word-itis” from my perspective.
Yes, your comment has reached the right spot! And thank you for your encouragement – as I work alone, I really enjoy the “blog conversations” that can develop, and it is great to know that people are reading and thinking and commenting.
Best wishes from Susan