The Financial Services Authority (FSA) has fined Royal Bank of Scotland plc (RBS) £750,000 for breaches of its money laundering rules.
This is the first financial penalty levied by the FSA for money laundering control failings since the FSA acquired this power on 1 December 2001.
The FSA's investigation revealed weaknesses in RBS's anti-money laundering controls across its retail network, finding that RBS failed either to obtain sufficient 'know your customer' documentation or to maintain adequate proofs of identity in new accounts opened in RBS branches in early 2002.
As well as having insufficient evidence to verify clients' identities, in some cases RBS was unable to supply copies or details of documents such as a passport and driving licence duplicates or recent utility bills.
Carol Sergeant, managing director of the FSA, says: “The steps RBS took to satisfy itself that their clients really were who they claimed to be were inadequate. We have made clear that we expect all financial firms to have strong and effective anti-money laundering procedures in place and – equally importantly – to ensure that they are properly implemented.
“This requires firms to monitor the effectiveness of those procedures to ensure an appropriate standard of compliance. Firms that fail to do this lay themselves open to increased risks of being used for money laundering.”
In a statement the Royal Bank of Scotland said: “We fully support the FSA in the fight against money laundering. There is absolutely no evidence of any money laundering having taken place. Our internal systems discovered that there was for a short time failures in our procedures. We quickly sorted the problem and believe we now have leading edge systems in this area.”
The FSA fined RBS despite its “open and constructive approach to the FSA's investigation” saying the fine imposed was very substantially lower than it otherwise would have been.
In mitigation, RBS discovered the problems through its own testing in December 2001. Additionally, although the breaches revealed weaknesses in RBS's anti-money laundering controls, in most cases at least some attempt had been made to identify the customers.
The city regulator adds that the action has caused the failure rate to fall significantly from April 2002 and the FSA is satisfied that the bank has dealt with the issue effectively.