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Last Updated: Thursday, 15 January, 2004, 08:08 GMT
Watchdog fines Bank of Scotland
HBOS headquarters
The bank had weaknesses in its record-keeping systems
The Bank of Scotland (BoS) has been fined 1.25m for a breach of money laundering rules.

The Financial Services Authority (FSA) said the bank failed to keep proper records on the identity of customers.

Weaknesses in record-keeping systems and controls were found across its retail, corporate and business banking divisions

The FSA said that following the discovery of the failings, the bank has implemented an action plan.

In over half of the sample of accounts tested in late 2002, BoS had failed to retain either a copy of the customer identification evidence or a record of where this evidence could be obtained, the FSA said.

Whilst we haven't found actual evidence of money laundering or terrorist financing, it certainly exposed the bank to the risk that their accounts might be used for those sorts of things
Andrew Procter
FSA
These failings were made worse by BoS' inability to determine the areas in which the breakdown in its record keeping systems had occurred.

The breaches identified were in the Bank of Scotland part of the HBOS business.

The FSA said, however, that after the failings were discovered, BoS promptly and effectively implemented a robust remedial action plan across the whole of the HBOS Group.

This action has caused compliance rates to improve significantly from January 2003 and the FSA is satisfied that the bank had dealt with the issue appropriately, it added.

Andrew Procter, FSA director of enforcement, said: "The failure by Bank of Scotland to keep proper records of customer identification could have seriously undermined its ability to comply with the requirements of orders served by law enforcement agencies under the Proceeds of Crime Act.

Error 'regret'

"The level of the fine really reflects the level of risk that arises - it was a very widespread failure within the Bank of Scotland.

"Whilst we haven't found actual evidence of money laundering or terrorist financing, it certainly exposed the bank to the risk that their accounts might be used for those sorts of things."

The Bank of Scotland group said it regretted the error on its part and was working closely with the FSA in the fight against money laundering.

It added that none of their customers have been adversely affected by the charges.

The FSA's money laundering rules were introduced in December 2001 as part of a general worldwide crackdown on funding methods used by terrorist groups.


WATCH AND LISTEN
Andrew Procter on Good Morning Scotland
"It's really the basic information about who their customers are"



SEE ALSO:
HBOS boss apologises to customers
13 Jan 04  |  Scotland
Watchdog fines Abbey record 2.3m
10 Dec 03  |  Business
Wealth management firm fined
26 Nov 03  |  Business


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