FSA fines Northern Bank 1,250,000 for money laundering control failings

Carol Sergeant, Managing Director of the FSA, said:

"The FSA has made clear that we expect all financial firms to establish and maintain strong and effective anti-money laundering procedures. Firms that fail to do this significantly increase the risk of criminals misusing the financial system to support their criminal activities as well as failing to meet their legal obligations to prevent money laundering. "

"The steps Northern Bank took to satisfy itself that its customers, particularly business customers, really were who they claimed to be, were inadequate. Northern Bank had previously identified weaknesses in their customer identification procedures but allowed them to persist."

"The size of the fine in this case reflects the prevalence of the breaches, Northern Banks share of the market it operates in and its failure to take prompt and effective remedial action after it had originally identified its own failings."

The FSAs investigation revealed weaknesses in Northern Banks anti-money laundering controls across its retail branch network. The investigation found that Northern Bank failed to obtain sufficient know your customer information to prove customer identity in an unacceptable number of new business accounts opened across its retail branch network between December 2001 and September 2002.

Examples of inadequate verification of identity are where the bank only verified a clients name but not the address, or where the documents the bank obtained were not capable of verifying identity. The failure to adequately identify business clients was a major cause for concern given the fact that corporate entities have been identified by the financial services industry as among the most likely vehicles for money laundering.

As a result of the FSAs action, Northern Bank has put in place a comprehensive and effective action plan that has remedied these serious shortcomings and the FSA is now satisfied that the bank has dealt with the problem.

Notes for editors

1. The FSA concluded that Northern Bank had contravened Rules 3.1.3 of the FSAs Money Laundering Rules. Rule 3.1.3 provides that:

   • "(1) A relevant firm must take reasonable steps to find out who its client is by obtaining sufficient evidence of the identity of any client who comes into contact with the relevant firm to be able to show that the client is who he claims to be."

2. Documents that can be used to verify a customers identity - that is, his or her name and address - are set out in the Joint Money Laundering Steering Group Guidance Notes and include a valid passport, a driving licence and a recent utility bill. For businesses, evidence of the identities of the principal beneficial owners/controllers should generally be obtained as should evidence of the trading address of the business.

3. Enforcing breaches of the Money Laundering Rules is only one aspect of the FSAs work in reducing the extent to which regulated firms can be used for the purpose of money laundering and terrorist financing. The FSA also works with the financial services industry to develop anti-money laundering initiatives, share best industry practice and provide training. Recent FSA projects include:

   • Publishing the results of an FSA review of current practices across a number of banks and building societies in the retail banking sector (further details at http://www.fsa.gov.uk/pubs/other/ml_domestic_banking.pdf)

   • Hosting a money laundering conference for the financial services industry in July 2002.

4. Northern Banks registered office is in Donegall Square West, Belfast. More information on Northern Bank can be found on its website at the following address: http://www.nbonline.co.uk

5. Further information about the FSAs anti-money laundering work can be found on the FSA website at http://www.fsa.gov.uk/what/ml_terrorist.html

6. The FSA regulates the financial services industry and has four objectives under the Financial Services and Markets Act 2000: maintaining market confidence; promoting public understanding of the financial system; the protection of consumers; and fighting financial crime.

7. Copies of the Final Notice in this case are available on request from the FSA Press Office.