Small banks and financial crime – are you doing enough?

During the last two years, the FCA has shown an increased interest in tackling financial crime.  A number of thematic reviews have been conducted to assess regulated firms’ approach and management of financial crime risk, in particular anti-money laundering (AML) and anti-bribery and corruption (ABC) systems and controls.

These thematic reviews have been followed by skilled persons reviews being undertaken leading to possible enforcement actions.

Is it just a 'tick-box' Exercise?

The short answer is “No” and this is one of the fundamental mistakes that firms, including banks, appear to make when relating to financial crime. Not only is this a misconception, but it will almost certainly lead you to enforcement.

To emphasise this point, in 2012 the FCA introduced the Systemic AML Programme (SAMLP) which covered 14 major retail and investment banks operating in the UK. The Annual Report states that the overall findings from the SAMLP assessments and general AML work has been disappointing, with a number of significant weaknesses identified. These weaknesses included:

  • inadequate governance and oversight of money laundering risk;

  • inadequate risk assessment processes to identify high risk customers;

  • poor management of high risk customers and PEPs, particularly in relation to establishing source of wealth and source of funds;

  • inadequate due diligence on correspondent banks;

  • inadequate AML/sanctions related IT systems;

  • weakness in handling alerts to sanctions;

  • poor judgements or questionable decisions leading the firm to take on unacceptable money laundering risk.

The FCA acknowledges that over the past 24 months much of the AML work has been focused on the larger banks however the risk of money laundering is not necessarily related with the size of the firm.

As a result, the FCA has announced that it plans to extend the SAMLP plan to target firms that pose a higher risk of money laundering.

In order to achieve this the FCA is classifying all regulated firms into four risk bands, taking into consideration a number of factors including the nature of a firms business, and the jurisdictions in which it is located or operates.

We believe that, in light of this, firms should be reviewing their procedures before they get the call from the regulator. Please contact us if you require any support or would like to discuss the issue further.


Anthony Rawlins

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