FSA's thematic report on banks' management of high money-laundering risk situations, published alongside its draft Financial Crime Guide (see FReD This Week 24 June), revealed several weaknesses common to many firms it surveyed. FSA was concerned in particular that:

  • some banks appeared unwilling to turn away from profitable business despite significant AML concerns;
  • there was widespread failure to apply meaningful enhanced due diligence (EDD) in high-risk situations and risk assessment frameworks were often not robust enough to identify all situations where EDD should apply;
  • several banks did not have in place effective procedures to identify when they were dealing with Politically Exposed Persons (PEPs);
  • relationship managers were often too close to the customers to take objective views and were rewarded on profit and new business, regardless of their AML performance; and
  • record keeping and review procedures were often inadequate.

FSA also identified some deficiencies in banks' due diligence when providing correspondent banking services. (Source: Banks' management of high money-laundering risk situations)