If you thought the Financial Services Authority fining the Royal Bank of Scotland £5.6m for failures in money laundering controls had nothing to do with you, think again.
This is a wake-up call for all financial organisations regardless of size. Compliance with money laundering legislation has always been a serious business but now the consequences for getting it wrong have proved to be rather expensive.
Unfortunately, for smaller businesses there is confusion about what constitutes adequate compliance with the regulations.
In any financial transaction you have to have confidence that the client is who they say they are. This is usually done using photographic evidence such as driving licences or passports and utility bills – yet this is not without flaws as examples abound of fake documents.
And even if you are able to confirm a client’s identity it doesn’t mean you have complied with money laundering legislation.
Advisers who meet clients every day could say that because they have known the client for years, this is all a pointless exercise. But the FSA and Revenue & Customs have broad-reaching views about what could constitute a risk and it’s not just about new customers or whether the broker has met the customer face-to-face or not.
Brokers should undertake a risk assessment for the business and have an ongoing monitoring and record-keeping process to show a proactive stance in line with other compliance requirements.