The Royal Bank of Scotland has been fined 5.6m pounds for failing to follow regulations that prevent banks from lending to unsafe individuals that belong on government ban lists such as terrorist organizations.
The FSA (Financial Services Authority) stated that the RBS failed to properly screen transactions and customers throughout 2008, which created the risk that they may have issued loans to sanctions targets and terrorist groups.
Although no such incidents were indicated by the investigation, given the large degree of risk the bank was fined for allowing such an opportunity to occur.
FSA director of enforcement and financial crime, Margaret Cole, stated that a UK financial institution that makes it possible to fund or offer any type of financial or economic resources to those on a sanctions list undermines the safety and credibility of the financial services sector in the UK.
The large fine amount is the first penalty that has been handed out by the FSA after the 2007 Money Laundering Regulations came into effect and is meant to serve as a clear warning to other banking institutions that the regulations need to be supported by proper lending screening procedures.
The RBS was able to reduce the fine by 30% because they settled early into the investigation by the FSA and stated that they have already taken steps to correct the unfortunate situation.
Head of risk at RBS, Nathan Bostock, stated that the investigation brought to the RSB’s attention that there were some deficiencies in their policies and controls that will be fixed.
