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Are Banks Still Vulnerable To Money Laundering In The UK?

According to the Financial Conduct Authority (FCA), major banks are likely to be facilitating money laundering due to insufficient internal processes. The survey, which assessed 17 banks and major UK lenders, showed that they were vulnerable to ‘dirty’ money being transferred through their account system.

The FCA has warned these banks that these criminal gangs wash £10bn through the UK economy every year, and that their financial institutions may be supporting illegal practices. Banks are being urged to look closely at transactions and not turn a blind eye.

Instances of Major Money Laundering

After last year’s HSBC scandal, the bank was fined $1.9bn by US regulators for aiding Mexican drug cartels and smashing Iranian sanctions. And it wasn’t alone. Standard Chartered was fined $327m for financing Iranian, Libyan, and Sudanese trade.

Lloyds and Barclays also fell afoul of money laundering law, which paints a pretty bad picture of UK banks. Many of these banks narrowly missed criminal prosecution.

Unfortunately, due to the fact that economies work off the back of their banks, these financial institutions have become too big and important to fall. Therefore, it’s almost impossible to charge them with a criminal offence, because it could cause financial instability for the country.

HSBC only got away with just a hefty fine by signing a controversial deal with the US. They publically apologised for their poor money laundering controls and had to claw back some of the bonuses paid to senior executives, in order to pay for system improvements.

The FCA’s Regulation

The FCA did not paint an optimistic picture and admitted to be being ‘disappointed’ with the state of money laundering precautions.

Scrap metal is a high risk commodity for money laundering, but some banks were processing metal trading, without any documents to show who was making the transaction. It’s possible that, in light of this investigation, the FCA may enforce further regulatory action to knock the banks back into shape. As of yet, there have been no proposals.

It’s in everyone’s interest to reduce the instances of financial crime in the UK economy (unless, of course, you’re a money launderer). Last year alone, the FCA fined businesses £312m for their monetary malpractices. Which just goes to show how important regulation is for the economy. The money gleaned from these fines will go straight to the Treasury. Some of this cash will go to military charities.

How Does Money Laundering Work?

Criminal organisations can hide the source of their illegal money by making it ‘clean.’ This means successfully transferring it from one bank account to another – or investing it in high value items – to hide its origins. Once it enters the economy, it’s often untaxed, so it’s important that financial institutions catch it quickly, before it can harm financial stability.

All banks are bound by law to report any suspicious activity or suspected money laundering. Mostly, criminals go through offshore companies to launder their cash. It seems, however, that they’ve been able to get away with channelling money through some of the UK’s major banks.