Banks may face fines over failures to spot trade finance abuses
Reuters July 1, 2013, 10:02 pm
LONDON (Reuters) - Some banks may face fines or other punishments for failure to spot abuses in their trade finance business such as money laundering, sanctions busting or funding of terrorists, the Financial Conduct Authority said on Monday.
A review of banks' trade finance by the FCA found about half of the 17 banks examined - which included four big British banks - had no clear policy or procedures for looking out for trade-based money laundering risks.
"Our main conclusion is that the majority of banks in our sample, including a number of major UK banks, are not taking adequate measures to mitigate the risk of money laundering and terrorist financing in their trade finance business," it said.
The FCA found that banks' internal audits failed to consider financial crime controls.
"We are also considering where further regulatory action may be required for certain banks in our review."
In trade finance, banks act as an intermediary for companies importing or exporting goods, an important role in providing money for international trade.
It includes letters of credit that guarantee payment will be made for the goods, and providing funding when pre-payment is required.
'FRESH AIR'
Tracey McDermott, the regulator's head of enforcement, said the review found that in some cases the only thing that was sometimes being shipped was "fresh air."
"Some banks have a lot of work to do to raise their game to the best of their peers," McDermott told a conference on financial crime.
But there were some impressive examples of best practice at some banks. For example, one bank told the regulator that if a foreign army was importing shower gel, the transaction had to be signed off by a managing director to check exactly who the end user was.
But at another bank, scrap metal - "a high risk commodity in money laundering terms" - was being sold by a company in the British Virgin Islands to a company in the United Arab Emirates but the documents showed no details of the party taking delivery, the regulator said.
McDermott also said a "deep dive" into Britain's biggest banks to check their general anti-money laundering controls was continuing and its scope might be widened in future.
"We are still too often left disappointed by what we see," McDermott said. The regulator will publish data on what its money-laundering work uncovers.
(Reporting by Huw Jones. Editing by Jane Merriman)
