The FCA issued a cash-based money laundering alert

Measures designed to reduce the risk of money laundering via the Post Office have been published by the Financial Conduct Authority (FCA). This is due to concerns that criminals are moving hundreds ofmillions of pounds via the Post Offices by depositing banknotes into bank accounts.

The FCA brought together partners including the National Economic Crime Centre (NECC), industry and government to strengthen controls while seeking to ensure that legitimate customers can continue to use the Post Office for everyday banking. 

According to the FCA’s executive director of Consumer and Competition, “We have worked in partnership with law enforcement, industry, and government to ensure people and businesses can still draw on the vital cash banking services provided by the Post Office, while addressing gaps that criminals could abuse.This important work is part of the FCA’s three-year strategy on reducing financial crime and increasing consumer protection”.

Research conducted by the FCA found that 6% of adults in the UK used cash to pay for products and services over a 12-month period since May 2021, with this percentage increasing to 9% for those invulnerable circumstances. All of this points to Post Offices playing an important role in protecting access to cash for people and small businesses.The FCA stated that while most people have reasonable access to cash, it is very important that any money laundering protection initiative do not compromise legitimate customers and businesses wanting to make use of services offered by the Post Office.

According to NECC estimations, hundreds of millions of pounds are laundered through the cash deposit channel at the Post Office each year. The FCA stated that although banks have made a lot of progress to improve safeguards, including a 43% decrease in the time taken to report suspicious activities at the Post Office, there is a lot more work to be done.The FCA further added that they expect banks and the Post Office to keep their controls, including newly introduced controls, under constant review to ensure that controls are proportionate to the risks and suitable for the institutions’customer bases. There is an expectation from the FCA that this will be achieved by refining measures through the use of data, where required, as money laundering risks evolve.

The specific measures issued by the FCA for banks include:

·       A move towards card-based transactions and away from paying-in slips,where possible, to allow enhanced monitoring. 

·       Upskilling staff to spot patterns of suspicious activity.  

  • Enhancing     monitoring capabilities in banks which allow them to identify suspicious     activity. 
  • Reducing     cash deposit limits at the Post Office, subject to customer arrangements,     to below the existing limit of £20,000 per transaction. Banks should take     a data-led approach and consider whether a tailored offer is     appropriate. 
  • Reducing     the time taken to submit Suspicious Activity Reports to the National Crime     Agency (NCA), enabling them to take timely action.   
  • Improving     intelligence sharing so that information is passed on to other firms, law     enforcement and the FCA on a regular basis. 

The FCA clearly stated that they will test the safeguards put in place by firms and this will determine whether firms have taken the required steps to protect access to cash at Post Offices for legitimate customers.

Financial Crime Frameworks that are fit for purpose

With this stern warning issued by the FCA it is crucial that firms must review their Anti-Money Laundering (AML) and broader Financial Crime programmes on a regular basis to ensure that it conforms to the newly added measures and are fit for purpose. Lysis Group has an extensive track record of helping firms to successfully achieve and maintain Financial Crime Compliance by focusing on providing consulting services across the governance, risk, and compliance (GRC) landscape with the distinct objective of reducing the short-and long-term costs linked to compliance.

With ever changing legislation, all firms should be vigilant in identifying and protecting themselves against potential money laundering activities to avoid financial scrutiny and hefty fines. Health checks and maturity assessments can identify any regulatory and policy gaps or areas of concern in a firm’s framework and independent testing of a firm’s Financial Crime Framework is a very important requirement from regulators to show that all controls are indeed effective.

Lysis Group has extensive experience in this regard and athorough understanding of the expectations from global regulators. The assessments are completed in line with the current industry regulations and best practices and bench marked against the firm’s business model and risk appetite. Upon completion of the health check and maturity assessment, LysisGroup can provide a detailed plan to advise firms on the next steps that should be taken to meet the regulatory requirements, both from a macro and micro perspective.

Lysis can also provide the necessary AML training needed by staff to spot patterns of suspicious activity more effectively. We can therefore support financial service institutions including wholesale and investment banks, payment services and cards, wealth managers, challenger banks and firms from a range of other regulated industries, plus crypto asset firms.

The FCA statement can be accessed via the following link:

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