Review announced into how UK banks control money laundering, terrorist financing and sanctions risks in trade finance.
Opening the UK regulator’s Financial Crime Conference today, Martin Wheatley, Chief Executive of the Financial Conduct Authority (the FCA) today announced, “The FCA will do all it can to make Britain a hostile place for criminals to profit from their crimes.”
The FCA’s financial crime conference attended by some 400 delegates from financial service firms, the Treasury and key law enforcement agencies including the SFO, SOCA, the National Crime Agency (NCA) and the FBI, discussed how tackling financial crime and protecting consumers from fraud and financial scams are a key part of its remit. Ensuring that markets operate honestly and that firms regulated by the FCA understand and take serious measures to tackle financial crime are also key.
The FCA receives over 4,500 reports a year relating to fraud, with the average consumer detriment reported to the FCA in excess of £1 million a month. Proactively tackling such scams as boiler rooms together with consumers becoming more savvy about new kinds of fraud has, however, led to a significant reduction in those who have contacted the FCA who have actually invested in such scams from 768 in 2011 to 97 so far this year. Current investment fraud concerns for the team include: pension liberation fraud; inheritance fraud; rare earth metals; diamonds; carbon credits and fraud relating to overseas land and property.
The FCA is committed to looking widely at risks to market integrity and risks to consumers and has therefore has created a new department to plug into consumer and market intelligence, linking intelligence from whistle-blowing, market participants, consumers, consumer groups and social and media networks. It has also established a cross divisional working group to ensure coherent action in relation to pension liberation fraud, and continues with its joint venture between its Enforcements and Markets divisions to target and prosecute the right insider dealing suspects.
Tracey Dermott, director of enforcement and financial crime, said:
“From next April we will be supervising thousands of extra consumer credit businesses. For these firms we will have the same general requirements for them to tackle financial crime as applies to the firms we regulate today. It is clear there will be big challenges for us here with the financial crime risks in this sector substantial.”
Last year, the enforcement team handed out a record £321m in fines, more than triple the previous high number of £89m and secured landmark legal victories against illegal land banking with an increase also in the number of insider trader cases being prosecuted.
Review announced into how UK banks control money laundering, terrorist financing and sanctions risks in trade finance.
On a separate but related theme the FCA also published today its thematic review into trade finance in UK based banks. Trade finance is internationally recognised as posing a high financial crime risk so the UK’s position as a major financial centre could be severely impacted if banks engaging in trade finance do not have appropriate systems and controls to prevent financial crime.
The review into 17 banks found that they had generally developed effective controls to ensure they were not dealing with sanctioned individuals and entities, but most had failed to adequately consider money laundering and terrorist financing risk in trade finance.
Common weaknesses identified included the following:
- Having no clear policy or procedures documents for dealing with trade-based money laundering risks thus failing to identify potentially suspicious transactions;
- Most banks produced little or no management information on financial crime risks in the trade finance business; and
- Many had not developed specific training on the risks of crime relating to finance relevant staff. As a result, evidence was found of staff failing either to make appropriate enquiries about financial crime risks or to escalate potentially suspicious transactions.
Tracey McDermott added:
“Banks and other financial organisations are in the front line regarding protecting against financial crime. We, and they, have a common interest in working in partnership to reduce the impact of financial crime both on the economy and more widely. Anti -money laundering measures and sanctions are in place to protect us from criminal activity. Financial institutions need to take this responsibility seriously and we will do whatever is necessary to ensure they do. We are considering whether further regulatory action may be required in relation to certain banks in the review“.
Notes to Editors
- Martin Wheatley's and Tracey McDermott's speeches.
- The thematic review: TR13/3 - Banks’ control of financial crime risks in trade finance.
- On the 1 April 2013 the Financial Conduct Authority (FCA) became responsible for the conduct supervision of all regulated financial firms and the prudential supervision of those not supervised by the Prudential Regulation Authority (PRA).
- The FCA has an overarching strategic objective of ensuring the relevant markets function well. To support this it has three operational objectives: to secure an appropriate degree of protection for consumers; to protect and enhance the integrity of the UK financial system; and to promote effective competition in the interests of consumers.
- Find out more information about the FCA, as well as how it is different to the PRA.