PwC's Managing upstream risk: Regulatory reform review - An asian perspective August 2013 | Page 13

Table 1: Summary of FCA’s AML annual report 2012/13 Thematic review findings • Around a third of banks, including the private banking arms of some major banking groups, appeared willing to accept very high levels of money laundering risk if the immediate reputational and regulatory risk was acceptable. • Over half the banks we visited failed to apply meaningful enhanced due diligence measures in higher risk situations and so failed to identify or record adverse information about the customer or the customer’s beneficial owner. • More than a third of the banks visited failed to put effective measures in place to identify customers as PEPs. • Three quarters of the banks in our sample failed to take adequate measures to establish the legitimacy of the source of wealth and source of funds to be used in the business relationship. • At more than a quarter of banks visited, relationship managers appeared to be too close to the customer to take an objective view of the business relationship. Many were primarily rewarded on the basis of profit and new business, regardless of their anti-money laundering performance. • Most banks had an inconsistent approach to risk assessment and only a few banks had conducted specific trade finance money laundering risk assessment. • About half of the banks had no clear policy or procedures document for dealing with trade-based money laundering risk and were unable to demonstrate that money laundering risk had been taken into account when processing particular transactions. • The root cause of these problems is often a failure in governance of money laundering risk. • Small firms often fail to collect enhanced due diligence information, as required under the MLR 2007. Large firms, including those that have been subject to SAMLP examinations, often collect adequate information but fail to assess it properly and/or make poor judgements a