RBS fined for IT system failure

Fined £5.6 million

The Royal Bank of Scotland (RBS) has been fined £5.6 million by the Financial Services Authority (FSA) for a series of IT system failures that could have resulted in the possible financing of terrorism.

According to the FSA, RBS did not have "adequate systems and controls in place to prevent breaches of UK financial sanctions between 15 December 2007 and 31 December 2008" at Ulster Bank, Coutts and Natwest units.

Due to this failure, RBS failed to ‘adequately screen' its customers as well as payments they made and received. During this year-long investigation, no payments from outside the UK were screened against the government's Treasury sanctions list.

As such, the financial group had run an "unacceptable risk" when it came to transactions involving targets of sanctions, some of whom are responsible for the financing of terrorist groups.

Security lapses

The FSA estimates that RBS bypassed 14,000 payment messages, totalling £2.5 billion, around its screening software opting to enter them manually in their gateway for Swift messages. The system also saw a failure in the screening software used to check payments against the Treasury list, which meant it did not block or screen transactions where the beneficiary name was across more than one line in the Swift message.

As if these problems weren't enough, the security software wasn't able to identify words within payments messages that were mis-spelt or inaccurately translated. This ‘fuzzy matching' saw several payments not picked up by the Treasury list.

RSB has reportedly settled the fine early, receiving a 30 percent discount but Nathan Bostock, head of the company's restructuring and risk department, has acknowledged the company's security lapses.

"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," he said.

In a statement, Margaret Cole, Director, Enforcement and Financial Crime, FSA, said, "By failing to screen relevant customers and payments against the HM Treasury sanctions list, RBS left itself open to the risk that it was facilitating terrorist financing."

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