Individuals in the firing line for AML

A landmark case which saw the UK's financial regulator, the Financial Services Authority (FSA) fine a money laundering reporting officer for the first time, is a sign regulators are taking a no-nonsense approach towards AML.

The FSA fined Sindicatum Holdings Limited, a corporate advisory firm, £49,000 for failing to implement effective systems and controls for verifying client identities. It also fined the company's Money Laundering Reporting Officer (Mr Michael Wheelhouse) £17,500. The fines imposed would have been 30% higher if Sindicatum had not agreed to an early settlement with the FSA.

"This fine is a warning to firms and individuals about the importance of complying with our rules in this area and we will not hesitate to clamp down on failures, where necessary," said William Amos, head of retail enforcement at the FSA.

Mark Dunn, manager, Risk & Compliance Services at LexisNexis said, “This is the latest indicator that the FSA is toughening up its approach to anti-money laundering compliance. Firms have had almost a year to update their systems and controls since the Money Laundering Regulations 2007 came into force last December. Dunn said that record keeping in particular was important in order to demonstrate that the MLRO has taken reasonable steps to verify the identity of all clients.

Tim Dolan, a financial services partner in Pinsent Masons' Corporate Group and a former member of the FSA's Enforcement Division remarked that:

"This case is significant as it is the first time that the FSA has fined an individual Money Laundering Reporting Officer ("MLRO"). It serves as a timely reminder that individuals who hold the MLRO function have responsibilities and can be personally liable for their firm's failings."

Dolan said the case was also significant as it demonstrated that the FSA is prepared to take action in the case of corporate advisory firms' anti-money laundering systems failing. In Sindicatum's case, Dolan said a number of shortfalls in their AML measures were highlighted:

- clients were not being identified at the time of take-on by the firm
- no attempt was made to verify which particular individuals were directors or controllers of clients;
- documents were in foreign languages, but the documents and their translations were not reviewed by the MLRO;
- photocopies of documents were not properly certified;
- relevant documents (including in one case copies of passports) were lost;
- client acceptance checklists were not complete or had not been reviewed by the account executives and the MLRO.