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May 18, 2012updated 12 Apr 2017 11:47am

Firms’ £525k warning against money laundering

The Financial Services Authority (FSA) has urged finance companies to take stock of their anti-money laundering protection after fining the UK operation of Habib Bank AG Zurich £525,000 for insufficient diligence. Karen Wagstaffe, head of compliance at KMW Automotive Solutions agreed companies with Money Laundering Reporting Officers (MRLO) or Controlled Functions, typically directors, owners and those holding group F&I roles need to be mindful that they have their anti-money laundering policies up to date and are checking their staff are adhering to them. Wagstaffe, however, warned recent FSA penalties could stifle companies in the current economic climate and the authority needed to judge whether its actions and warnings were effective and not aggressive.

By Richard Irvine-Brown

The Financial Services Authority (FSA) has urged finance companies to take stock of their anti-money laundering protection after fining the UK operation of Habib Bank AG Zurich £525,000 for ‘insufficient’ diligence.

Karen Wagstaffe, head of compliance at KMW Automotive Solutions agreed companies with Money Laundering Reporting Officers (MRLO) or Controlled Functions, typically directors, owners and those holding group F&I roles “need to be mindful that they have their anti-money laundering policies up to date and are checking their staff are adhering to them.”

Wagstaffe, however, warned recent FSA penalties could stifle companies in the current economic climate and the authority needed to judge whether its actions and warnings were “effective” and not “aggressive”.

Most notable in the car finance sector has been the FSA penalty imposed on used car supermarket Carcraft over PPI compliance standards.

“This year alone, the FSA has fined in excess of £30m,” said Wagstaffe. “[Does] this type of action indicate a more aggressive policing approach by the FSA or merely that the FSA is asserting their responsibilities more overtly?”

‘Failure to take reasonable care’

The FSA said the fine handed to Habib, plus £17,500 for its former MRLO, was for “failure to take reasonable care to establish and maintain adequate anti-money laundering systems and controls”.

Particularly, the FSA estimates half of the deposits held by Habib’s 15,500 UK customers came from jurisdictions with less stringent anti-money laundering requirements, over which the bank had failed to assess the level of money laundering risk.

In two-thirds of the 68 Habib customer files reviewed by the FSA the account had either been inappropriately classified as normal risk, or insufficient evidence was gathered as part of due diligence, and / or such diligence was not carried out before transactions began.

‘We will not hesitate to take action’

Tracey McDermott, acting director of enforcement and financial crime took the case of Habib to remind finance companies of the need for vigilance against money laundering:

“Firms must take a dynamic approach to assessing money laundering risk so they can adapt to the ever-evolving risks of financial crime… The requirement for enhanced due diligence recognises that some customers present a greater risk of money laundering than others and that firms therefore need to do more to identify, manage and control that risk.”

McDermott urged all MRLOs, often the company secretary or finance director, to “properly evaluate, on an ongoing basis, the adequacy and effectiveness of the AML systems and controls which they are responsible for.

“Where individuals fail to meet their regulatory responsibilities we will not hesitate to take action,” she concluded.

richard.brown@vrlfinancialnews.com

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