UK’s FSA advances laundering work by targeting six vulnerable sectors

UK’s FSA advances laundering work by targeting six vulnerable sectors
09/01/2001

Even before the United Kingdom’s Financial Services Authority gains rulemaking power on December 1 as the unified regulator for the financial sector, it is alerting British financial institutions to their money laundering vulnerabilities.

Even before the United Kingdom’s Financial Services Authority gains rulemaking power on December 1 as the unified regulator for the financial sector, it is alerting British financial institutions to their money laundering vulnerabilities. An FSA report on financial crimes published on August 13 reaffirms its focus on money laundering and identifies six “clusters” of activity it perceives as particularly vulnerable. Law gives FSA more muscle Under the Financial Services and Markets Act of 2000, the FSA has the power to issue money laundering regulations and impose penalties. It also can extend its regulatory reach beyond banks, insurance companies and investment concerns to sectors that include credit unions and securities and derivatives firms. Urges more anti-laundering action In its report, the FSA urges all financial institutions to increase their money laundering prevention and detection procedures. “The heightened political and regulatory interest in money laundering underlines the urgency for the financial sector to implement appropriate systems and controls to combat money laundering…,” the FSA said. It said it will focus on six areas in the laundering field: international banking and high-risk jurisdictions, domestic banking, independent financial advisers and offshore funds, online stock brokering, spread-betting and credit unions. Will follow FATF guidelines In monitoring private and correspondent banking practices, the agency said it would likely follow the guidelines of the Paris-based Financial Action Task Force, which for the past two years has released a “blacklist” of non-cooperative nations. As a primary example of the vulnerabilities in international banking, the FSA report highlights its probe of how freely several U.K. banks took in hundreds of millions of dollars that the late Nigerian dictator General Sani Abacha and his family had stolen and extorted from Nigeria. Suspected laundering cases rise Suspected cases of money laundering hit a record level last year, the U.K.’s National Criminal Intelligence Service (NCIS) recently reported. About 18,400 reports of suspected laundering were filed, an increase of 27% from 1999. Disclosures edged up only 3% between 1998 and 1999. One of the U.K.’s biggest weaknesses in its money laundering effort is the low number of banks that report suspicious activity. About 170 of the nation’s 575 registered banks, or about 30%, filed suspicious activity forms with the NCIS last year. The FSA emphasizes in its report that it will deploy “enforcement teams” to investigate noncompliance by financial institutions. It vows to exercise its new powers starting in December, including sanctioning firms for not having money laundering controls in place.