UK financial services companies face 230m of potential fines over inadequate document management for anti-money laundering measures

The UK financial services sector faces potential fines of over 230m because their document management standards are inadequate to support effective anti-money laundering measures. This is the finding of new research from Anacomp, the information management specialists, which focused on the current state of document and records management systems and processes in the financial services sector.

The research showed that only 43.5% of financial services companies have effective document management policies and procedures in place. This weakness is exposing the sector from banks and building societies to pensions companies, stockbrokers, fund managers and IFAs to substantial potential fines under anti-money laundering rules. Furthermore, the reputational damage that such fines inflict on financial services companies is arguably of more concern than the pure financial impact.

The twin threats of international terrorism and cross-border criminality have brought the issue of money laundering into sharp focus over recent years, and it was identified by the UK Financial Services Authority (FSA) as a serious and priority issue in 2001. Back then, the FSA noted that firms need to review their internal policies and procedures to ensure that reporting lines within the firm are clear. Identifying, verifying and tracking customer identities in financial services is essentially a document-focused process. Anacomps research set out to investigate whether financial institutions have put their records management houses in order since 2001.

Chris Haden, Managing Director, Anacomp UK, explains, The situation remains seriously inadequate. Our study revealed that only 43.5% of UK financial services have effective and formalised document management policies and procedures meaning, of course, that the overall majority (56.5%) do not. The underlying document and records management is a fundamental element of anti-money laundering compliance.

The FSA has already handed out a series of fines to financial institutions for not adopting sufficient safeguards against money laundering. Anacomps research identified that the average fine received from the FSA by institutions specifically falling short on the anti-money laundering issue is currently over 1m.

Chris Haden adds, Given the extent of the weakness in records retrieval and retention, we can conclude that the financial services industry faces the likelihood of almost 250m in fines if matters do not improve. Money laundering will not disappear as a priority regulatory issue for the FSA. The technology analysts are also highlighting the ability to manage documents as a key building block in todays increasing regulated business environment. There really is no option for financial services companies but to move swiftly to avoid financial penalty and reputational damage.