According to Tracey McDermott, head of enforcement at the Financial Conduit Authority, of the 17 banks which were recently chosen for a review, half were not adequately protected against becoming a channel for money laundered by criminals and terrorists.
Worryingly, four banks which were guilty of the poor controls were major lenders in the UK. That’s four out of the five big banks of the country.
So why are UK banks so bad at stopping the abuse of the financial system by criminals?
The problems
At present, it would seem that current rules and sanctions regarding the act of money laundering are not enough to stop the bad behaviour of the banking community. Given the size of these organisations, it’s not enough to threaten imprisonment – as the Telegraph reports, big banks are simply ‘too big to jail’.
This has caused no end of frustration to consumers – even since the financial crisis, which was reportedly caused by the banking sector, very few bankers have been called to court. In fact, the only recent instance of note in which bankers were in the courtroom was when 104 former investment bankers who won more than £40million in unpaid bonuses.
Changes required within the banking sector are bound to be slow – when there are literally thousands of members of staff to take into account and offices bases all over the world, implementing new rules can take a long time.
However, the FCA’s most recent report has called for banks to speed up that process and clean up the bank sector.
Banks fined for misbehaviour
Speaking of the analysis, McDermott said “Some banks have a lot of work to do to raise their game to the best of their peers. Chief executive of the FCA, Martin Wheatley, added:
“It’s simple not acceptable for firms to turn a blind eye to where the money comes from, its journey from A to B.”
This analysis comes after the news that US regulators fined HSBC a record amount of $1.9billion for involvement in money laundering. HSBC had been reportedly aiding Mexican drug cartels and breaking sanctions imposed in Iran.
In addition, Lloyds and Barclays have been fined thanks to breaching anti-money laundering rules.
It’s not just money that’s been under the spotlight regarding banks’ bad behaviour; the FCA also dealt with a case in which scrap metal was being traded with no documents or receipts, financed by one bank to a United Arab Emirates business. In the case of scrap metal, McDermott pointed out this was to be seen as “a high risk commodity in money laundering terms.”
Further regulatory actions have been suggested by the FCA, though this has not yet been confirmed.
