I was going to make a post earlier this week about RBS and the FSA, but I had to go and look up the percentage state ownership (84% as it turns out) because it is quite relevant.
Earlier this week the FSA fined Royal Bank of Scotland Group plc (RBS) £5.6 million for not keeping adequate controls to prevent breaches of U.K. money-laundering rules. The Financial Services Authority said between December 2007 and December 2008, RBS units RBS PLC, NatWest, Ulster Bank and Coutts & Co. failed to adequately screen their customers and the payments they made and received against a U.K. sanction list.
"This resulted in an unacceptable risk that RBS could have facilitated transactions involving sanctions targets, including terrorist financing," the FSA said in a statement. Because RBS settled the claim at an early stage, it received a 30% reduction in the fine, the regulator added. RBS says it brought the deficiencies to the FSA's attention. The agency then launched the investigation, which has been disclosed in documents to the bank's shareholders.
"We have taken appropriate action to remedy these issues and continue to enhance our control environment with a view to ensuring a more robust sanctions compliance framework and ultimately that our detection and prevention capabilities are in line with best practice in the market," RBS said.
Wooahh, lets stop right there! What is going on here? At the end of 2008 and thereafter, the tax payer recapitalised RBS and took 84% of the common equity in the RBS group. If it hadn't done so the whole group would havce effectively disappeared, so the money and new management put in by the government is what has kept it going, but the fine relates to the period between 2007 and 2008 mostly under the old management and certainly under procedures set up by the Fred Goodwin orchestra.
So why is the tax payer who put in most of the £5.6 million being asked to pay for the mistakes of the previous management? And they must have been big mistakes to merit a £5.6 million fine if there was no actual money laundering. OK, 16% of that actually reduces the value of shares held by the "old" RBS shareholders, but the £800k the tak payer makes from that is probably more than covered by the FSA and their advisors' costs of the investigation.
And why is it the new management team (who brought the mistakes to the attention of the FSA) being made to pay? The poor procedures happened while RBS was under the supervision of the FSA. If anybody was guilty of lax procedures (apart from the old guard at RBS) it was the FSA who had to be told rather than finding out about the issues themseles, not the new management team, but in the la-la world of UK banking supervision, no one is accountable and everyone makes meaningless gestures at the tax payers' expense.