Tracey McDermott addresses FSA Financial Crime Conference
22nd June 2011Tracey McDermott, acting director of enforcement and financial crime at the Financial Services Authority (FSA), today highlighted the continuing importance of financial crime within the future UK regulatory landscape.
Speaking at the FSA's financial crime conference, Tracey McDermott explained that the Financial Conduct Authority (FCA) will assume the FSA's responsibilities on financial crime and will continue to focus on "the use of firms as a conduit for financial crime".
She added that the FCA will continue the FSA's intensive and intrusive supervision of financial crime issues and that the FCA will pursue the objectives of "keeping crooks out of finance, encouraging industry to strengthen its defences, and educating and warning consumers about the dangers they may face".
The FSA has also today published three documents relating to financial crime:
- a consultation paper which proposes a new guide designed to help firms reduce the risk of their business being used to facilitate financial crime;
- a thematic review of how banks manage their money laundering risks, particularly around their management of high risk customers including Politically Exposed Persons (PEPs), correspondent banking relationships and wire transfer payments; and
- a thematic review assessing the adequacy of lenders' systems and controls to detect and prevent mortgage fraud.
The proposed financial crime guide aims to improve firms' understanding of the FSA's expectations in this area and collates existing FSA statements on financial crime, drawn mainly from thematic reviews. It provides guidance on anti-money laundering, terrorist financing, fraud, data security, bribery and corruption, sanctions, and weapons proliferation financing.
The anti-money laundering thematic review focused on how banks manage high risk customers including PEPs, correspondent banking relationships and wire transfer payments. The review found that some banks appeared unwilling to turn away, or exit, very profitable business relationships, including with PEPs, where there appeared to be an unacceptable risk of handling the proceeds of crime. Among other findings, three quarters of the banks sampled failed to take adequate measures to establish the legitimacy of the source of their customers' wealth and the source of the funds to be used in the business relationship. The FSA has serious concerns about these findings. So far, two banks have been referred to enforcement following the identification of apparent serious weaknesses in their systems and controls for managing high risk customers including PEPs.
The mortgage fraud thematic review assessed the adequacy of lenders' systems and controls to detect and prevent mortgage fraud. The report showed that, although lenders have made some improvements, there are still weaknesses common to many firms. As a result of the findings, some lenders will have to implement remedial programmes to strengthen their anti-fraud systems and controls. The FSA will continue to focus on lenders' compliance in this area.
