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FSA Censures 15 Banks Over Role in Abacha Dirty Money Scandal

A staff reporter

29 January 2005

The Financial Services Authority has imposed strict deadlines on seven banks to correct significant weaknesses in their anti-money laundering controls and warned them that law enforcement authorities are probing potential breaches of the 1993 Money Laundering Regulations. Eight other banks were also censured. The move follows yesterday’s publication of the UK regulator’s three-month investigation into accounts linked to General Sani Abacha, the late former president of Nigeria. The regulator did not mince its words. “The extent of the weaknesses identified is frankly disappointing. When we launched the investigation we said that we would order banks to take immediate action if problems were found,” said Phillip Thorpe, managing director at the FSA. A total of 23 banks were found to have links to the Abacha family and close associates, 15 with severe weaknesses. Eight have already taken corrective action. “Potential breaches of the money laundering regulations are also being discussed with the appropriate law enforcement authorities,” said Thorpe. These include the police and the National Criminal Intelligence Service. Thorpe warned that when the FSA’s new anti-money laundering enforcement powers come into effect later this year, they would be rigorously applied. The FSA is unable to name the banks under its current powers. Later this year it will be given additional powers that would let it name and shame banks found to have inadequate controls against money laundering. One compliance officer said banks were in an invidious position with money laundering. It was well known in the City that the FSA will clampdown on verification procedures later this year but that in itself did not make it any easier to deal with the problem, he said. “Dealing with is like having a large glass of water and then dropping a bit of ink. You know it is there, it becomes finely watered down but there is no way you can extract it,” said Nigel Morris-Cotterill, editor of World Money Laundering Report. The deadline for the seven banks linked to the Abacha case is not set in stone, although the FSA would expect the remedies are put in place by year-end at the latest. “The deadline for banks varies, depending on the size of the bank and the number of suspected breaches of money laundering regulations. It can take up to a couple of months. We expect all necessary changes to be in place before the end of the year. One factor, which will speed up the process, is that the FSA will appoint forensic accountants to crawl through the books of the banks. So, the longer it takes the banks to comply with the regulations, the more it will cost them,” a spokesman told Complinet. The FSA investigation identified 42 personal and corporate account relationships linked to Abacha family members and close associates in the UK. These accounts were held at 23 banks which included UK banks and branches of banks from both inside and outside the European Union. In total, turnover on the accounts amounted to $1.3bn for the four years between 1996 and 2000. This figure relates only to the turnover on the accounts over this period; it does not necessarily represent the proceeds of crime or the amount of money received into the UK. Some 98 per cent of the $1.3bn went through the 15 banks with significant control weaknesses. The FSA found that a number of the banks had reported suspicions to the NCIS on a timely basis. The British Bankers’ Association was unable to shed much light on the FSA findings. “We believe that in general the industry is committed to compliance with the anti-money laundering regime but it is not for the BBA to comment on specific cases about which we have no knowledge,” said a spokesman. Updated money laundering guidance notes produced by the Joint Money Laundering Steering Group, which is chaired by the BBA, are to be published imminently. The FSA is participating with key international regulators in developing guidance for financial firms on handling accounts of high profile political figures.