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FCTR 12.1 Introduction

FCTR 12.1.1G

1Who should read this chapter? This chapter is relevant, and its statements of good and poor practice apply, to banks we supervise under the Money Laundering Regulations. FCTR 12.3.2GFCTR 12.3.5G also apply to other firms we supervise under the Money Laundering Regulations that have customers who present a high money-laundering risk. It may be of interest to other firms we supervise under the Money Laundering Regulations.

FCTR 12.1.2G

1In June 2011 the FSA published the findings of its thematic review of how banks operating in the UK were managing money-laundering risk in higher-risk situations. The FSA focused in particular on correspondent banking relationships, wire transfer payments and high-risk customers including politically exposed persons (PEPs). The FSA conducted 35 visits to 27 banking groups in the UK that had significant international activity exposing them to the AML risks on which the FSA were focusing.

FCTR 12.1.3G

1The FSA’s review found no major weaknesses in banks’ compliance with the legislation relating to wire transfers. On correspondent banking, there was a wide variance in standards with some banks carrying out good quality AML work, while others, particularly among the smaller banks in the FSA’s sample, carried out either inadequate due diligence or none at all.

FCTR 12.1.4G

1However, the FSA’s main conclusion was that around three-quarters of banks in its sample, including the majority of major banks, were not always managing high-risk customers and PEP relationships effectively and had to do more to ensure they were not used for money laundering purposes. The FSA identified serious weaknesses in banks’ systems and controls, as well as indications that some banks were willing to enter into very high-risk business relationships without adequate controls when there were potentially large profits to be made. This meant that the FSA found it likely that some banks were handling the proceeds of corruption or other financial crime.

FCTR 12.1.5G

1The contents of this report are reflected in FCG 2 (Financial crime systems and controls) and FCG 3 (Money laundering and terrorist financing).