FCA warns challenger banks over money laundering concerns
The watchdog found that many challenger banks were not doing enough to fight financial crime.
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Your support makes all the difference.One of the UK’s main regulators has warned challenger banks to stop cutting corners in combating financial crime so that customers can set up accounts quickly and easily.
Sarah Pritchard, who heads the market division of the City regulator, said that there cannot be a “trade-off” between getting customers to come into the fold and the checks that all banks need to do.
The Financial Conduct Authority (FCA) found that many challenger banks were not doing enough to fight financial crime.
Some of the banks did not even have a so-called customer risk assessment system set up.
The assessments are key ways of ensuring that a bank knows who its customers are and can manage the risks of money laundering.
It is a legal requirement for companies that are covered by the UK’s money laundering regulations.
“Without a customer risk assessment, a firm can’t ensure that due diligence measures and ongoing monitoring are effective and proportionate to the risks posed by its individual customers,” the FCA said.
Ms Pritchard said that it is important to prevent financial crime to show that the UK is a safe place for people and companies to do business.
“Challenger banks are an important part of the UK’s retail banking offering,” she said.
“However, there cannot be a trade-off between quick and easy account opening and robust financial crime controls.
“Challenger banks should consider the findings of this review and continue enhancing their own financial crime systems to prevent harm.”
Since their emergence after the financial crisis, challenger banks have taken on the established competition and attracted millions of customers away from their traditional banking homes.
The FCA found that some risky customers were slipping through the net and only being discovered by the banks after they had already been a customer for a while.
“Our findings indicated that these customers shouldn’t have been onboarded and that better controls and risk assessment may have identified them sooner,” it said.
There has been an increase in the number of reports that the challenger banks send to authorities when their customers do something suspicious.
But the quality of these reports is sometimes poor. Some of the reports just list transactions without explaining why they are suspicious.