'Culture of fear' under attack from RBS chief

Published on Thursday 4 December 2003 00:00

FRED GOODWIN, the chief executive of Royal Bank of Scotland, has blasted the creeping "we’d better report everything" mentality bank staff were being forced to adopt to prevent falling foul of money-laundering rules.

Mr Goodwin highlighted the culture of fear spreading among bank staff that demands they report any unusual transactions to the National Criminal Intelligence Service.

Criticising the rules and penalties, he said: "Many of the penalties are so draconian that you might as well report every transaction."

Last year, RBS was fined 750,000 by watchdog body the Financial Services Authority for "inadequate" checks against money-laundering. However, the FSA admitted that they found no evidence of any money-laundering having taken place.

Tough new money-laundering rules came into force in the wake of the September 11, 2001, terrorist attacks in a bid to choke off the supply of cash which might be funding terror activities.

According to the Government, an estimated 25 billion from the proceeds of crime are laundered in Britain each year. In March 2001, it emerged that 750 million had been laundered through 23 London banks by the family and friends of Sani Abacha, the late Nigerian dictator.

Money laundering is now one of the key priorities for the FSA.

Speaking at seminar on financial crime, Mr Goodwin said the new rules created a culture where staff were being forced to take a "we’d better report everything" view, in case innocuous transactions later proved to have fallen foul of the rules.

A recent report by services group KMPG found the NCIS service was being snowed under by a backlog of reports which have risen from 15,000 in 2000 to 63,000 in 2002.

Leigh Lewis, permanent secretary at the Home Office, said the NICS was getting on top of the backlog. "NCIS is in a much healthier position and they do not have a mountain of reports awaiting their attention."

Clive Briault, head of prudential standards at the Financial Services Authority, said

there were "a number" of enforcement cases currently being processed against institutions where it had found poor systems.