UK firms are prohibited from providing financial services to persons on the HM Treasury sanctions list. The Money Laundering Regulations 2007 require that firms maintain appropriate policies and procedures in order to prevent funds or financial services being made available to those on the sanctions list. These regulations require firms to establish and maintain appropriate policies and procedures in order to prevent funds or financial services being made available to designated persons on the list of financial sanctions targets maintained by HM Treasury. The Terrorism (United Nations Measures) Order 2006 and The Al-Qaida and Taliban (United Nations Measures) Order 2006 make it an offence to make funds or, in the case of the Terrorism Order, financial services available, directly or indirectly, to a designated person on the HM Treasury sanctions list unless a license is first obtained from HM Treasury.
According to the FSA during 2007, RBSG processed the largest volume of foreign payments of any UK financial institution. However, between 15 December 2007 and 31 December 2008, RBS Plc, NatWest, Ulster Bank and Coutts and Co, which are all members of RBSG, failed to adequately screen both their customers, and the payments they made and received, against the sanctions list. This resulted in an unacceptable risk that RBSG could have facilitated transactions involving sanctions targets, including terrorist financing.
The FSA considers that RBSG’s failings in relation to its screening procedures were particularly serious because of the risk they posed to the integrity of the UK financial services sector. This is the biggest fine imposed by the FSA to date in pursuit of its financial crime objective. It is also the first fine imposed by the FSA under the Regulations.
Margaret Cole, FSA director of enforcement and financial crime, said:
"The involvement of UK financial institutions in providing funds, economic resources or financial services to designated persons on the sanctions list undermines the integrity of the UK’s financial services sector. By failing to screen relevant customers and payments against the HM Treasury sanctions list, RBSG left itself open to the risk that it was facilitating terrorist financing.
"The scale of the fine shows how seriously the FSA takes this issue and should act as a warning to other firms to ensure that they have adequate screening procedures."
As RBSG agreed to settle at an early stage of the FSA investigation, it qualified for a 30% reduction in penalty. The FSA would have otherwise imposed a financial penalty of £8m.
