The Financial Conduct Authority (FCA) has threatened to take action against retail banks over anti-money laundering failings. It highlights ‘persistent failings’ in financial crime controls that have resulted in regulatory intervention.
The UK’s financial regulator sent a letter to banking industry chiefs across the UK in May – which was recently made public via its website hub.
Written by David Geale, the director of retail banking & payments supervision for the FCA, the missive highlighted key issues and weaknesses surrounding retail banksâ financial crime controls. It also requested that each firm complete a gap analysis of each of the identified weaknesses and take prompt and reasonable steps to resolve them by 17 September 2021.
The letter warned that the regulator is likely to request a demonstration of the steps taken after this date and, if deemed inadequate, the FCA may consider appropriate regulatory action in order to manage the financial crime risk posed.
Financial risk
The FCA pointed out that the consequences of poor financial crime controls in a high-risk sector such as retail banking are significant. It can lead to criminals abusing the financial system to launder the proceeds of
crime, supporting further criminal activity and damaging the integrity of the UK financial market.
The common control weaknesses identified and cited were in the following areas: governance and oversight; risk assessments; due diligence; transaction monitoring and suspicious activity reporting (SARS).
According to Encompass Corporation, a provider of intelligently automated know your customer solutions, retail banking is a high-risk sector for illicit financial crime activity.
Wayne Johnson, CEO of Encompass Corporation, said: “Banks, therefore, must work proactively and collaboratively with the FCA and other regulatory bodies to ensure they are onboarding customers, reporting information and complying accurately with current existing regulations and industry recommendations.
âCombatting the rising financial crime threat demands said banks to equip themselves with sophisticated regulation technology that automates compliance processes â making them more efficient, secure and cost effective.
“Implementing or upgrading software and bolstering processes will also be key to demonstrating to the FCA that they are taking the threat seriously, and executing the necessary steps to help address the evident weaknesses in the fight against financial crime.â
Earlier this month, the FCA banned Binance, one of the world’s largest cryptocurrency exchanges, from the UK.
