Money laundering hotspots could see advisers get burned

The notice regards what the FSA warns is the lack of comprehensive anti-money laundering and combating terrorist financing systems in Uzbekistan, Iran, Pakistan, Turkmenistan, Sao Tome and Principe and the northern part of Cyprus.

The warning was issued by the Financial Action Task Force, an inter-governmental body established by the G7 countries in 1989. The UK is holder of the rotating FATF presidency until this summer.

A year ago the government published a document 'The financial challenge to crime and terrorism'. It set out its approach to using financial tools to deter crime and terrorism; detect it when it happens; and, disrupt those responsible and hold them to account for their actions.

The FATF is recommending that all UK businesses within the financial sector factor this heightened risk into account and consider applying increased scrutiny and due diligence to any transactions associated with Uzbekistan, Iran, Pakistan, Turkmenistan, Sao Tome and Principe and the northern part of Cyprus.

Last autumn the FSA said it had identified areas where the practices of mortgage advisers could lead to an increased risk of fraud and money laundering.

In one of a series of reviews undertaken by the FSA it examined sales of self-cert mortgages. During the course of the review it found many serious failings, including readiness to proceed with arranging a mortgage despite doubting the accuracy of financial information customers were giving them.

Stephen Bland, director of small firms for the FSA, said: "During the reviews we saw a number of good advisers who are meeting the required standards and they are being undermined by the negligence or wilful non-compliance of others. We also saw some who despite having some way to go, were willing to engage with us and be helped to improve their performance, which is why we are providing so much guidance following these reviews. However there are still an unacceptable number of firms unwilling to change and they are damaging the rest of the industry.

"We found some firms willing to offer mortgages they know to be unaffordable and to accept self-cert business even where they had concerns that the financial information provided by the customer was implausible. These practices are completely inconsistent with treating customers fairly - hence the large number of enforcement referrals and other regulatory actions.

"Overall there is a need for a big improvement in senior management's use of management information to help achieve the fair treatment of their customers to achieve the progress we and the industry as a whole want to see."

The main areas identified in the reviews as needing improvement include the assessment of affordability, the collection of customer information to establish clients' needs supervision and assessment of advisers' competence and the use of management information. The reviews also identified areas where firms' practices could lead to an increased risk of fraud and money laundering."

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