Lloyds to face AML controls investigation

The Financial Conduct Authority (FCA) of the UK has initiated an investigation into Lloyds Banking Group’s Anti-Money Laundering (AML) controls.

As detailed in the lender’s annual report, Lloyds underlined that the investigation is related to its compliance with the money laundering regulations in the UK and the Financial Conduct Authority’s rules and principles of business, focusing on its controls framework. The report mentions that the bank has been cooperating with the investigation and cannot estimate the potential financial impact or if there would be any. At the time of the announcement, Lloyds declined to comment on the matter.

The Financial Conduct Authority (FCA) of the UK has initiated an investigation into Lloyds Banking Group’s Anti-Money Laundering (AML) controls.

Moreover, Lloyd’s disclosure followed the bank’s raise of GBP 450 million provision that is set to cover potential costs from a current review into motor finance, which was reported along with its 2023 financial results. However, the bank highlighted that the provision did not reflect an admission of liability.

The FCA’s investigations extend to other banks in the UK, with Barclays disclosing in its annual report that the regulatory body probed its compliance with money laundering rules. However, the bank was later informed that the FCA was closing its investigation. Additionally, NatWest received a GBP 264 million fine in December 2021 after admitting to breaching AML regulations. At that time, the bank failed to prevent the laundering of approximately GBP 400 million, in one of the first criminal money laundering cases by regulators against a UK-based bank.

The UK’s rise in money laundering activities

Due to criticism over the rise in the movement of illicit cash in the region over recent years, the UK’s authorities intend to increase their caution on money laundering controls at the country’s banks. The UK Finance’s Annual Fraud report from 2023 underscored that the focus applied by banks across pillars of detection, processes, and customer education supported the reduction in the value of Authorised Push Payment (APP) scams by 17% in 2022 compared to 2021. Even though minimisation of scam losses was seen, banks returned a record GBP 285.6 million to consumers, as advance fee and purchase scam cases increased significantly. Since these scam types involved decreased average payment and loss amounts, banks had a more difficult time detecting them.

Furthermore, as highlighted in BDO’s recent report, fraud scaled substantially in 2023, with the total amount of fraud value being estimated at GBP 2.3 billion. Also, high-value fraud increased by 60%, while corruption represented the top type by worth, reaching GBP 594 million. The rise in fraud was also influenced by the use of technology, as it expanded the reach and impact of cyber-enabled deceptive activities, leading to an increase in reported online scams from 2022 to 2023.

Article Credit: https://thepaypers.com/digital-identity-security-online-fraud/lloyds-to-face-aml-controls-investigation–1266901