FCA Issues New Measures for Banks to Reduce the Risk of Criminals Abusing Cash Deposit Services

The Financial Conduct Authority (FCA) has introduced a new raft of measures for financial institutions to help them mitigate the risk of cash deposit channels being criminally abused for money laundering purposes. The new rules come in light of the National Economic Crime Centre (NECC) estimating that hundreds of millions of pounds are laundered through cash deposit services like the Post Office every year. 

According to the regulator’s Financial Lives 2022 Survey, six percent of adults in the UK used cash to pay for everything from May 2021 to May 2022, rising to nine percent for those in vulnerable circumstances. Sheldon Mills, Executive Director of Consumers and Competition at the FCA said, “We have worked in partnership with law enforcement, industry, and government to ensure people and businesses can still draw on the vital cash banking services provided by the Post Office while addressing gaps that criminals could abuse.” 

FCA Expectations 

To reduce the risk of money laundering via the Post Office, the FCA expects banks to:

• Have transaction monitoring capabilities that allow firms to identify suspicious activity in non-branch cash deposits and to detect deviations between expected and actual activity. 
• Move away from paying-in slips, and towards card-based transactions, to reduce the opportunity for third-party deposits being made into accounts and allow for enhanced monitoring. 
• Train staff on typologies and patterns of suspicious activity identified through Post Office cash deposits. 
• Reduce cash deposit limits, subject to their customer arrangements, to below the existing £20,000 per transaction. 
• Adopt a data-led, tailored approach to business accounts based on expected business customer activity. 
• Reduce the time taken to submit suspicious activity reports (SARs) to the National Crime Agency (NCA).   
• Use intelligence to identify Post Office locations where large amounts of cash are being laundered and share this intelligence regularly with other firms, law enforcement, and the FCA.

The regulator also proposes a cash deposit limit for personal accounts of £1,000 per 24-hour period for individual accounts and £10,000 per 12-month period. Banks should also consider whether a tailored approach for personal accounts is appropriate.  

The Criminal Abuse of Cash Deposit Services

According to the 2020 UK National Risk Assessment, cash-based money laundering remains heavily characterized by cash-intensive businesses being used to disguise criminal sources of wealth. However, the assessment also noted increased abuse of cash-related services, such as cash deposit services in Post Offices and cash couriers. 

This trend was highlighted in another case reported by the National Crime Agency (NCA) on April 26, which dismantled a cash courier network that laundered more than £104 million by smuggling the funds out of the UK to Dubai. The network, 11 of which have been convicted so far, communicated on a Whatsapp group called ’Sunshine and lollipops,’ with each courier receiving up to £3,000 for every trip.

Believed to be the proceeds of drug dealing, the cash was vacuum packed and separated into multiple suitcases weighing around 40kg each. The cases were then sprayed with air fresheners or coffee to prevent them from being discovered by Border Force detection dogs. 

Key Takeaways 

Financial institutions that are part of the Banking Framework Agreement should be aware that the FCA plan to test whether firms have implemented appropriate safeguards to mitigate the abuse of cash deposit services in light of the regulator’s updated expectations. Compliance staff should start with a gap analysis to ensure new measures are implemented efficiently. What areas in their current process struggle most to meet the FCA’s expectations? Once the most pressing inefficiencies are identified, firms can consider how best to address them. When enhancing a firm’s transaction monitoring capabilities, compliance teams should particularly consider the benefits of artificial intelligence and machine learning to prioritize alerts and understand semantic context.