City of London banks told to improve protection against ML

We expected financial industry to have taken more action, says City watchdog, revealing lax procedures to counter crime

The Financial Conduct Authority has warned City firms to strengthen their defences against financial crime after it found serious failures in wealth and asset managers' anti-money laundering and corruption measures.

A review by the watchdog found that most firms fell short when it came to preventing financial crime. It said offenders included companies that should have known better and firms that had already been told to clean up their act.

In its report, the FCA said: "Given our strong regulatory focus and previous publications on anti-money laundering and anti-bribery and corruption we expected firms to have taken more action.

"Our findings were of particular concern where the firms were part of major financial groups, which should have been aware of our expectations. In some cases, the firms we visited were from groups that had been subject to previous regulatory attention but we still found significant weakness."

At one firm, the annual money laundering report for 2011 did not go to the board until August 2012 and another had not checked its money laundering risks since May 2011.

Another firm's bosses said its exposure to financial crime was "low" but could not show how they had reached that conclusion.

The FCA has pledged to clamp down amid concerns that London is a major venue for laundering the proceeds of crime and money used to fund terrorism.

The regulator found widespread failings in checking high-risk customers such as government officials from dictatorships. A firm had checked a long-standing customer from the Cayman Islands a week before the FCA's visit but there had been no check for more than 10 years before that.

A customer withdrawal of £25m triggered an alert at a firm but there was no evidence of how it was investigated or cleared.

The regulator said firms were not doing enough to clamp down on bribes. Limits on gifts and hospitality that did not need management approval ranged from £25 to £500.

The FCA said it was disturbed by the failings because its rules were clear and it had already exposed slack practice at banks and insurers.

Its 2011 review found that three quarters of banks did not run enough checks on customers' wealth. The following year Coutts was fined £8.75m for sloppy controls.

An FCA spokeswoman declined to comment on whether wealth and asset managers found wanting in its latest review would be punished.

The report said: "We have provided feedback to those firms in our review but we expect all firms to consider our findings. We will be following up with some firms to discuss the actions they should take."

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