RBS hit with huge fine for Goodwin failings

Royal Bank of Scotland suffered a major embarrassment yesterday when the state-owned bank was fined a record £5.6m by the City watchdog for failing to ensure that funds were not transferred to people under Treasury sanction.

The fine, covering the period from 15 December 2007 until 31 December 2008, comes as a fresh indictment of the stewardship of the former chief executive Sir Fred Goodwin, who was in charge at the time.

The Financial Services Authority – called in by the new management – said that in that year RBS processed the largest volume of foreign payments of any UK financial institution. Because RBS and its subsidiaries NatWest, Ulster Bank and Coutts failed to adequately screen customers and the payments they made and received against the sanctions list there was "an unacceptable risk that RBS could have facilitated transactions involving sanctions targets, including terrorist financing".

The list includes terrorist groups such as al-Qa'ida and the Taliban, a number of Middle Eastern and African companies, and a string of individuals in countries including Iraq, Iran, the Democratic Republic of Congo and North Korea. The watchdog said RBS's failures constituted a threat to the integrity of Britain's financial system.

The fine means the taxpayer is subsidising lower regulatory fees for the City – proceeds from such penalties are used by the FSA to help fund its work and reduce its fees to regulated firms.

The FSA found a string of failings of systems at the bank and its subsidiaries, not least that the main software supposed to screen payments against the Treasury list during the relevant period did not work if the name of the beneficiary of a payment was presented across more than one line. While the systems and controls were the subject of reviews, such as after the bank's disastrous acquisition of ABN Amro, they failed to pick up the seriousness of the failings.

Those failings covered incoming payments to customers; sterling payments made by customers except those going to US institutions; and euro payments made by customers.

Margaret Cole, FSA director of enforcement and financial crime, said: "The involvement of UK financial institutions in providing funds, economic resources or financial services to designated persons on the sanctions list undermines the integrity of the UK's financial services sector. By failing to screen relevant customers and payments against the HM Treasury sanctions list, RBSG left itself open to the risk that it was facilitating terrorist financing. The scale of the fine shows how seriously the FSA takes this issue and should act as a warning to other firms to ensure that they have adequate screening procedures."

The FSA said that RBS had agreed to settle early, and so qualified for a 30 per cent discount. Had it not done this the fine would have been £8m. Nathan Bostock, RBS head of restructuring & risk, said: "We acknowledge the findings of the FSA investigation. It confirmed the deficiencies we had identified and brought to their attention, in our policies, procedures and controls during the year to December 2008, though the FSA noted that it did not consider this misconduct deliberate or reckless. We have taken appropriate action to remedy these issues."

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksA special investigation by Andy McSmith
Life and Style
Powdered colors are displayed for sale at a market ahead of the Holi festival in Bhopal, India
techHere's what you need to know about the riotous occasion
Arts and Entertainment
Larry David and Rosie Perez in ‘Fish in the Dark’
theatreReview: Had Fish in the Dark been penned by a civilian it would have barely got a reading, let alone £10m advance sales
News
Details of the self-cleaning coating were published last night in the journal Science
science
News
Approved Food sell products past their sell-by dates at discounted prices
i100
News
Life-changing: Simone de Beauvoir in 1947, two years before she wrote 'The Second Sex', credited as the starting point of second wave feminism
peopleHer seminal feminist polemic, The Second Sex, has been published in short-form to mark International Women's Day
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Evening Administrator

£8 per hour: Recruitment Genius: This Pension Specialist was established early...

Guru Careers: Executive Assistant / PA

£30 - 35k + Bonus & Benefits: Guru Careers: We are seeking an Executive Assist...

Ashdown Group: Graduate Application Support Analyst

£25000 - £30000 per annum + benefits: Ashdown Group: A global leader operating...

Reach Volunteering: External Finance Trustee Needed!

Voluntary post, reasonable expenses reimbursed: Reach Volunteering: Would you ...

Day In a Page

Homeless Veterans campaign: Donations hit record-breaking £1m target after £300,000 gift from Lloyds Bank

Homeless Veterans campaign

Donations hit record-breaking £1m target after huge gift from Lloyds Bank
Flight MH370 a year on: Lost without a trace – but the search goes on

Lost without a trace

But, a year on, the search continues for Flight MH370
Germany's spymasters left red-faced after thieves break into brand new secret service HQ and steal taps

Germany's spy HQ springs a leak

Thieves break into new €1.5bn complex... to steal taps
International Women's Day 2015: Celebrating the whirlwind wit of Simone de Beauvoir

Whirlwind wit of Simone de Beauvoir

Simone de Beauvoir's seminal feminist polemic, 'The Second Sex', has been published in short-form for International Women's Day
Mark Zuckerberg’s hiring policy might suit him – but it wouldn’t work for me

Mark Zuckerberg’s hiring policy might suit him – but it wouldn’t work for me

Why would I want to employ someone I’d be happy to have as my boss, asks Simon Kelner
Confessions of a planespotter: With three Britons under arrest in the UAE, the perils have never been more apparent

Confessions of a planespotter

With three Britons under arrest in the UAE, the perils have never been more apparent. Sam Masters explains the appeal
Russia's gulag museum 'makes no mention' of Stalin's atrocities

Russia's gulag museum

Ministry of Culture-run site 'makes no mention' of Stalin's atrocities
The big fresh food con: Alarming truth behind the chocolate muffin that won't decay

The big fresh food con

Joanna Blythman reveals the alarming truth behind the chocolate muffin that won't decay
Virginia Ironside was my landlady: What is it like to live with an agony aunt on call 24/7?

Virginia Ironside was my landlady

Tim Willis reveals what it's like to live with an agony aunt on call 24/7
Paris Fashion Week 2015: The wit and wisdom of Manish Arora's exercise in high camp

Paris Fashion Week 2015

The wit and wisdom of Manish Arora's exercise in high camp
8 best workout DVDs

8 best workout DVDs

If your 'New Year new you' regime hasn’t lasted beyond February, why not try working out from home?
Paul Scholes column: I don't believe Jonny Evans was spitting at Papiss Cissé. It was a reflex. But what the Newcastle striker did next was horrible

Paul Scholes column

I don't believe Evans was spitting at Cissé. It was a reflex. But what the Newcastle striker did next was horrible
Miguel Layun interview: From the Azteca to Vicarage Road with a million followers

From the Azteca to Vicarage Road with a million followers

Miguel Layun is a star in Mexico where he was criticised for leaving to join Watford. But he says he sees the bigger picture
Frank Warren column: Amir Khan ready to meet winner of Floyd Mayweather v Manny Pacquiao

Khan ready to meet winner of Mayweather v Pacquiao

The Bolton fighter is unlikely to take on Kell Brook with two superstar opponents on the horizon, says Frank Warren
War with Isis: Iraq's government fights to win back Tikrit from militants - but then what?

Baghdad fights to win back Tikrit from Isis – but then what?

Patrick Cockburn reports from Kirkuk on a conflict which sectarianism has made intractable