Here's the latest from Cityboy
Last week, UK regulator the Financial Services Authority (FSA) fined Coutts £8.75m for failing to take reasonable care to establish and maintain effective anti-money laundering systems and controls relating to high risk customers.
The failings at Coutts were said to be 'serious, systemic and were allowed to persist for almost three years'. In my view, however, the Coutts case is just the tip of the iceberg. In fact, I believe that most City firms have got extremely lax money laundering controls, and that this is going to be the next big financial scandal to blight the Square Mile.
Although Coutts has claimed that no money laundering actually took place due to its shortcomings, the FSA has said that there were ‘serious failures in client screening, especially as regards ‘Politically Exposed Persons’ (PEPs e.g. dodgy despots).
The problem is that Coutts is most definitely not alone in being lax here. I clearly recall the on-line money laundering exam that I used to have to take every year when I was an equity analyst. Well, what I actually remember most about it is that I, and nearly everyone else on my floor, used to get their graduate trainee to sit at their computer and do it.
In fact, whole analyst teams used to persuade the same poor bloke to sit at their desks and get the requisite 25 out of 30 score! What this meant was that virtually no-one understood anything about ‘layering’ or ‘Smurfs’ - although the upside is that, if any corrupt rogue out there happens to chose my former firm to attempt to launder his cash through, there’s a small chance they might come up against the most clued-up banker in town!
So last week’s FSA statement that it was ‘difficult to see how firms’ senior management could provide effective oversight’ because their knowledge of corruption laws is so poor, comes as no surprise (at least to me).
The City’s reputation has already taken a battering recently as a result of the financial crisis, Muppet-gate, insider trading allegations and so forth. And my concern that some of the bigger firms are going to come a cropper soon on the money-laundering front. Senior executives now need to take a long hard look at their compliance procedures, before yet another nail is hammered into the already besmirched reputation of the Square Mile.
Follow Geraint on Twitter at twitter/cityboylondon
Geraint Anderson’s novel Just Business is now out in paperback.
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