Regulation  

Retail banks face half of high risk customers

Retail banks face half of high risk customers

Retail banking firms have reported 390,000 high risk customers in 2019/2020, more than half the high-risk customers reported by all firms, according to data from the Financial Conduct Authority.

In data published today (October 7) as part of the FCA's financial crime analysis of firms’ 2017-2020 REP-CRIM data, the FCA said the figure was reflective of the sector’s business models, which made them more exposed to money laundering than other financial services firms. 

The introduction of the annual financial crime return (REP-CRIM) was designed to provide the regulator with insight into the potential financial crime risks faced by firms.

The REP-CRIM requires firms to report customers or clients categorised as being high-risk.

There were 735,967 high-risk customers reported in 2019-20, of which retail banking accounted for 390,420. 

The number of customers reported as high risk in 2017-18 was 1,047,338 and in 2018 -19 it was 797,416.

This was followed by investment banking with 175,789 for 2019-20, and wholesale financial markets, retail investments and retail lending. 

The FCA stated: "The retail banking sector is reporting more high-risk customers requiring enhanced due diligence compared to other sectors.

"Overall, there is a declining trend in the total number of such high-risk customers on the books of the firms reporting the data in most sectors."

In terms of customers exited for financial crime reasons, the FCA found the number had more than doubled in the past three years to a total of 761,437 customers. Again, retail lending and retail banking exited the most customers each year.

The number of customers refused for financial crime reasons totalled 2.05m in 2019/20 (0.45 per cent of total relationships reported).

The regulator also asked firms for the number of staff they employed in relation to combatting anti-money laundering, counter-terrorist financing, anti-bribery and corruption, and fraud.

For the year 2019/20, firms which submitted the REP-CRIM collectively employed 17,403 full-time equivalent staff in financial crime roles, compared to approximately 18,000 in 2018-19 and 15,700 during the year before.

The FCA estimates the firms are collectively spending around £1.1bn annually in dedicated staff time to combat financial crime.

The regulator said cyber-crime and frauds such as computer hacking and phishing were among firms' greatest concerns when it came to fraud. However, some long-established crimes, such as account takeover and card fraud, were also highly-cited threats. 

sonia.rach@ft.com

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