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

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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

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

“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

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.