Royal Bank of Scotland Group fined £5.6m by the Financial Services Authority fines UK sanctions controls failings

The Financial Services Authority (FSA) has fined members of the Royal Bank of Scotland Group (RBSG) £5.6m for failing to have adequate systems and controls in place to prevent breaches of UK financial sanctions.

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.

UAE to restrict use of BlackBerry technology

The authorities in the United Arab Emirates (UAE) are to restrict the use of Blackberry technology within the country. According to the UAE Telecommunications Regulatory Authority (TRA), the suspension of messenger, e-mail and internet services for the BlackBerry will be implemented this coming October.

The ban is to be introduced as the technical infrastructure of the BlackBerry features operate outside of the regulatory framework set up by the TRA in 2007. Because of this BlackBerry users cannot be effectively monitored by the UAE authorities which creates a number of national security concerns, the board explained.

Mohamed Al Ghanim, TRA director, said that the ban will be in place until “an acceptable solution can be developed and applied”.

“The TRA notes that Blackberry appears to be compliant in similar regulatory environments of other countries, which makes non-compliance in the UAE both disappointing and of great concern,” he added.

Reports have claimed that such a move could put the reputation of the UAE as a hub for business and financial services at risk it goes ahead.

In a similar move the authorities in Saudi Arabia have also announced that a ban on BlackBerry messaging services is to be implemented.

Forty Indian banks can now offer mobile banking

The Indian Government has said that 40 banks across the country have now been authorized to offer mobile banking services to their customers.

The government together with the Reserve Bank of India (RBI) have also put in place guidelines for mobile banking to prevent money laundering and terror funding through the system, according to the Indian Minister of State for Finance Namo Narain Meena.

"The RBI has authorised 40 banks till date to offer mobile banking services to their customers. To guard against money laundering, terror funding, etc, care has been taken while issuing mobile banking guidelines...," Meena said.

Under the rules, banks have to comply with various guidelines, including Know Your Customer (KYC), Anti-Money Laundering and Combating Financing of Terrorism (CFT), he added.

The minister said that banks can extend mobile banking services to any place in India with a one-time approval of the central bank. Banks can offer mobile banking services with a daily cap of Rs 50,000 (USD 1,080) per customer for fund transfer as well as transactions, he added.

Broad agreement reached on Basel Committee capital and liquidity reform package

The Group of Governors and Heads of Supervision (Group), the oversight body of the Basel Committee on Banking Supervision, met on 26 July 2010 to review the Basel Committee's capital and liquidity reform package. The Group is deeply committed to increase the quality, quantity, and international consistency of capital, to strengthen liquidity standards, to discourage excessive leverage and risk taking, and reduce procyclicality. The Group reached broad agreement on the overall design of the capital and liquidity reform package. In particular, this includes the definition of capital, the treatment of counterparty credit risk, the leverage ratio, and the global liquidity standard. The Committee will finalize the regulatory buffers before the end of 2010. The Group also agreed to finalize the calibration and phase-in arrangements at their meeting in September.

Mr Jean-Claude Trichet, President of the European Central Bank and Chairman of the Group, said that "the agreements reached today are a landmark achievement to strengthen banking sector resilience in a manner that reflects the key lessons of the crisis." He emphasized that "the Group of Governors and Heads of Supervision have ensured that the reforms are rigorous and promote the long term stability of the banking system. We will put in place transition arrangements that ensure the banking sector is able to support the economic recovery."



Mr Nout Wellink, Chairman of the Basel Committee and President of the Netherlands Bank added that "a strong banking sector is a necessary condition for sustainable economic growth." He added that the announcements today should provide additional transparency about the design of the Basel Committee reforms, thus reducing market uncertainty and further supporting the economic recovery. Mr Wellink underscored that "many banks have already made substantial strides in strengthening their capital and liquidity base. The phase-in arrangements will enable the banking sector to meet the new standards through reasonable earnings retention and capital raising."

In reaching their broad agreement, the Group considered the comments received during the public consultation on the Basel Committee's proposed reforms, which were published in December 2009. They also took account of the results of the Quantitative Impact Study, the assessments of the economic impact over the transition and the long run economic benefits and costs. The Basel Committee will issue publicly its economic impact assessment in August. It will issue the details of the capital and liquidity reforms later this year, together with a summary of the results of the Quantitative Impact Study.

The key broad agreements of the Governors and Heads of Supervision are summarized in the “Annex” which may be downloaded from the BIS by clicking HERE.

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