RBS reveals U.S. money laundering probe

| August 6, 2012 | 0 Comments

Ruth Sunderland

16:42 EST, 5 August 2012


16:42 EST, 5 August 2012

Royal Bank of Scotland is under investigation in the US over shortcomings in its money laundering controls, it has emerged.

The troubled bank, which has set aside £310million to cover its computer meltdown, interest rate swaps and PPI loan insurance mis-selling, revealed the probe in the small print of its half-yearly results on Friday.

RBS said it is in talks with the UK and US authorities to discuss whether it may have broken the rules in the past, including American trade sanctions on rogue nations such as Iran.

Probe: U.S authorities are investigating 'deficiencies' in RBS' anti-money laundering procedures and other controls

Probe: U.S authorities are investigating ‘deficiencies’ in RBS’ anti-money laundering procedures and other controls

It disclosed that the US Federal
Reserve and state banking supervisors are conducting a review and have
demanded improvements on ‘deficiencies’ in its anti-money laundering
procedures and other controls.

Executives agreed to a ‘Cease and
Desist Order’ in July last year from the authorities, requiring the
bank to make sure it complies with US law, in particular anti-money
laundering rules.
The bank added it had put a ‘remedial programme’ in place.

Bosses at RBS have already admitted
the bank will be implicated in the Libor rate-rigging scandal that led
to rival Barclays being fined £290million.

Revelations of Barclays’ wrongdoing were swiftly followed by news HSBC
has set aside £445million in penalties for failing to prevent
money-laundering by terrorists and drug barons.
Sources said the penalty for RBS was unlikely to be on that scale.

The Edinburgh-based bank, which ran
up a £1.5billion loss in the first half of this year, has already taken
the rap for deficient controls against money-laundering.

Subsidiary Coutts was fined
£8.75million earlier this year for failings in its systems. And the
former Dutch bank ABN Amro, taken over by RBS during the credit crisis,
was made to pay $500million by the US Department of Justice for
violating trade sanctions with Iran, Libya, Sudan and Cuba.

In its documents, the bank said it
could be subject to ‘further actions’ and that these could have a
‘material adverse effect’ on its results.

It is also facing possible litigation
over its involvement in $85billion of mortgage-backed securities in the
US, where bundles of home loans are packaged together and sold on to

Many of these loans went bad in the credit crisis as hard-up American homebuyers could not afford to keep up repayments.

Finance director Bruce van Saun said the bank had enjoyed ‘some success’ in fending off such cases so far.

The bank’s US arm, Citizens, has also
agreed to make a $137million settlement for driving customers into
running up excessive overdraft fees, in a class action where it was
accused of ‘unconscionable’ conduct.

Van Saun added: ‘The first wave of
action by the authorities in the financial crisis was to look at the
safety and soundness of banks.

‘Now we are in the second wave where they have turned the focus onto banks’ conduct.’

‘We agree there must be a change in culture.’

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