City regulator fines RBS £5.6m for money laundering breaches

The Financial Services Authority has fined Royal Bank of Scotland Group £5.6 million for systems failures that could have seen the state-owned bank transfer money to suspected terrorists.

The FSA found RBS did not have adequate systems and controls in place to prevent breaches of UK financial sanctions.

It said that between 15 December 2007 and 31 December 2008, RBS Plc, NatWest, Ulster Bank and Coutts and Co, which are all members of RBS Group, failed to adequately screen customers and payments against the UK sanctions list.

Margaret Cole, FSA director of enforcement and financial crime, said that its failures risked helping to finance terrorist activity. 'By failing to screen relevant customers and payments against the HM Treasury sanctions list, RBSG left itself open to the risk that it was facilitating terrorist financing,' she said.

‘The scale of the fine shows how seriously the FSA takes this issue and should act as a warning to other firms to ensure that they have adequate screening procedures,’ she added.

UK firms are prohibited from providing financial services to persons on the HM Treasury sanctions list.

According to 2007 money laundering regulations firms must maintain policies and procedures to prevent funds or financial services being offered to people in the list.

As RBS agreed to settle at an early stage of the FSA investigation, it qualified for a 30% reduction in penalty from £8 million.

Over 2007, the FSA found that RBS processed the largest volume of foreign payments of any UK financial institution.