Northern Bank fined £1.25m for lax money laundering controls

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The Independent Online

Northern Bank, the Belfast-based lender that is part of the National Australia Bank group, was yesterday fined £1.25m by the Financial Services Authority for failing to have strict enough controls to stop money laundering.

After an investigation of the bank and its practices, Northern Bank was found to have breached the FSA's money laundering rules by failing to obtain sufficient information to prove a customer's identity. This is the third-largest fine handed out by the FSA for money laundering breaches.

"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," said Carol Sergeant, managing director of the FSA.

The regulator has in the past few years tightened its anti-money laundering rules in the wake of the increased threat of terrorism.

Ms Sergeant said that Northern Bank's efforts to satisfy itself that its customers, particularly business customers, really were who they claimed to be, had been inadequate. The investigation found that Northern Bank did not insist on sufficient identity checks in 'an unacceptable number' of new business accounts opened across its retail branch network between December 2001 and September 2002. The FSA said Northern Bank had previously identified weaknesses in its customer identification procedures but allowed them to persist.

If a bank only verifies a customer's name and not their address, it is considered an inadequate verification for money laundering purposes. Documents that can be used to verify a customer's identity - that is, his or her name and address - include a valid passport, a driving license and a recent utility bill.

Business customers must show that they are the principal beneficial owners or controllers of the firm and provide evidence of the trading address of the business.

As a result of the FSA's action, Northern Bank has put in place an action plan to remedy what the regulator described as 'very serious shortcomings'.

The FSA said it was now satisfied that the bank had dealt with the problem.