Realist, not conformist analysis of the latest financial, business and political news

NatWest Isn’t Being Prosecuted For Money Laundering

Gross profiteers

We’re about to be bombarded with insistences that the law needs to be changed for a bank has been found to be money laundering. Therefore everyone’s forehead bar-code must be read before any deposits into an account are allowed.

This is not actually what is happening and that’s not the necessary course of action.

Firstly, the very fact that there is a prosecution shows that we’ve already got laws about this sort of thing. For, we couldn’t have a prosecution without there being laws against this sort of thing. The very fact that we do have a prosecution is evidence both that we have the law and also that it’s being taken seriously.

Secondly – and we’ll stop at that for we’re not the P³ – money laundering is not the prosecution case. Rather, not filling out the paperwork to check for money laundering is the case. As with that earlier episode over Mexican drug money in fact. It’s a paperwork failure.

NatWest faces criminal prosecution over money-laundering

Nope. Or at best, sorta.

The Financial Conduct Authority said that the bank had accepted funds without doing the proper anti-money-laundering checks. Its prosecution carries the threat of unlimited fines and great reputational taint if the state-controlled business were to be convicted. A criminal conviction could lead to the bank being banned from some jurisdictions or denied public sector work.

Yep. The allegation is not sating the paperclip sniffers.

Now maybe that is a big and important thing and maybe it isn’t but it is different from actual money laundering.

The City watchdog has launched criminal proceedings against taxpayer-owned NatWest for alleged money laundering offences in the first prosecution of a British bank under laws introduced in 2007.

The former Royal Bank of Scotland has been accused of allowing increasingly large cash deposits to be paid into a customer’s account when the transfers should have been flagged as suspicious.

We might well think that money laundering did in fact take place. But that’s not even the allegation here. It is the failure to check, not the allowing it to happen that is being prosecuted.

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dcardno
dcardno
7 months ago

I think you overstate your case, Tim. A ‘paperwork failure’ would be performing the required checks (whatever they might be), but not reporting the results, or recording it in the wrong place, and so on. Failure to even make the required checks and inquiries (which is what is alleged) is more fundamental. It’s like making the distinction that ‘the bank’ didn’t launder money, their *customer* did. Well, yes – but if the bank facilitated it (in this case, through inattention), then they are culpable.

dcardno
dcardno
7 months ago
Reply to  Tim Worstall

From the article: the FCA claims that “…the bank had accepted funds without doing the proper anti-money-laundering checks.” That’s more than a paper-work error, Tim; if true, that’s a failure to apply legally-required procedures. I still think “a paperwork problem” understates what NatWest is accused of. Their defense (or response) may well be that it was ‘a paperwork problem’ – but I think then they have to demonstrate that the required checks were performed and the client passed the screening, but the results were not correctly reported or filed (internally or externally), which is always possible.

Nick Luke
Nick Luke
7 months ago

Oh, how I wish it could relate to the SNP bribes to Sanjeev Gupta.

Joshua Graham
Joshua Graham
7 months ago

AML systems exist for a reason. I find it hard to believe that they don’t have one, but they could be using it wrong which is just human error.

David Morris
David Morris
7 months ago

Meanwhile, in the real world, Banksters do what Bankster do.

The only solution is exemplary executions at Board of Director level.

Had this been effected post 2008, how many further banking scandals do you think we’d see ?

Boganboy
Boganboy
7 months ago
Reply to  David Morris

No doubt the banksters’d bribe their way out with their customers’ money and flee to Cuba or wherever with their ill-gotten gains.

MrVeryAngry
MrVeryAngry
7 months ago

I own and run a retail FS business that runs quite a bit of client money.
I have worked under the thrall of the Financial Catastrophe Authority since its inception.
It’s rule book is over 1 million paragraphs. It’s designed as a trap. There is no certainty in its rules.
This case is the FCA grandstanding in order to justify its continuing existence. Natwest ‘failings’ will be trivial.
The FCA is the racket here.

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