In a landmark ruling the FSA recently imposed personal financial penalties of £17,500 on a money laundering officer, in addition to a company fine of £49,000.

In deciding the penalty the FSA took into account the limited financial resources of the firm and its ability to pay the fine.  Save for these factors, the penalty would have been significantly larger.  In addition, in both cases, these fines would have been substantially higher had there not been full co-operation with the FSA.

Notably, this comes despite the FSA not finding any evidence of money laundering at the firm.  A warning to us all!  Rather, the penalties were for failing to implement procedures, as required by the regulations. Specifically:-

1. Failure to implement adequate procedures for verifying the identity of its clients;
2. Failure to adequately verify the identity of a significant number of its clients;
3. Failure to keep adequate records with regards to the verification of the identity of its clients; and
4. The MLRO (Money Laundering Reporting Officer) had failed to take reasonable steps to implement adequate procedures for controlling money laundering risk.

Key Lessons to be learnt

1. The FSA can – and does – fine organisations for failures in systems and controls in the absence of any actual money-laundering incidents.  In other words, we need to safeguard ourselves against visits from the Regulator as well as actual incidents of money laundering
2. Although the nominated MLRO is personally liable for any failings in a firm's anti-money laundering systems and controls - he is not the only one.  Directors and senior management -what the FSA terms 'Significant Influence Functions' (Controlled function 1-29) are also open to enforcement action from the FSA. Additionally, all employees are open to criminal prosecution (a fine and/or a prison sentence) for assisting in, failing to report or tipping off a money laundering incident.

The full rulings can be found at http://www.fsa.gov.uk/pubs/final/sindicatum.pdf and http://www.fsa.gov.uk/pubs/final/m-wheelhouse.pdf

Is this a potential area of concern for you and your company?  If so, please contact us on + 44 (0) 20 8652 9710 today to see how FusionExperience can review your systems and controls.

Gordon Easden
FusionExperience