Regulator issues financial crime warning to retail banks

Retail banks have been issued a warning by the FCA about weaknesses and failings surrounding their financial crime controls.

A letter, which was penned by FCA director of retail banking and payments supervision, David Geale, and sent to banking industry chiefs across the UK, was issued in May and made public on the FCA’s website on 29 June.

Geale outlined weaknesses surrounding retail banks’ financial crime controls and requested that each firm complete a gap analysis of each of the identified weaknesses, to take prompt steps towards resolving them by 17 September 2021.

The letter warned that the FCA is likely to request a demonstration of the steps taken after this date and, if deemed inadequate, the regulator may consider appropriate regulatory action in order to manage the financial crime risk posed.

The common control weaknesses identified by the FCA are in governance and oversight, risk assessments, due diligence, transaction monitoring and suspicious activity reporting.

Commenting on the regulator’s warning, Encompass Corporation CEO, Wayne Johnson, described retail banking as a “high-risk sector for illicit financial crime activity”, and said that an increase in both online banking and remote working has made money laundering even harder to detect.

“The banks, therefore, must work proactively and collaboratively with the FCA and other regulatory bodies to ensure they are onboarding customers, reporting information and complying accurately with current existing regulations and industry recommendations,” Johnson said.

“Combatting the rising financial crime threat demands said banks to equip themselves with sophisticated regulation technology that automates compliance processes – making them more efficient, secure and cost effective.

“Implementing or upgrading software and bolstering processes will also be key to demonstrating to the FCA that they are taking the threat seriously, and executing the necessary steps to help address the evident weaknesses in the fight against financial crime.”

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