Private banks boost risk controls
After Citigroup’s International Personal Bank faced anti-money laundering concerns this month, private banks are increasing their client vetting and risk controls.
Industry sources agree private banks are having difficulty complying with standards enforced by authorities. Ian Woodhouse, Ernst & Young head of private banking, said risk management and anti-money laundering is becoming more important.
He said: “Many private banks are struggling in this area. Typically, they have predominantly manual- based approaches, particularly in the account-opening area, which are subject to human-error risk and incur high costs to operate.”
In a report last year, the Financial Services Authority acknowledged that private banks were particularly vulnerable to fraud, because of their attractiveness to criminals with funds to launder.
However, private banks say the regulator is too thinly spread. The FSA does not have a dedicated managing director overseeing private banks. The job is split between the wholesale and retail heads.
A spokeswoman for the FSA said: “We regulate private banks in exactly the same way that we regulate investment banks, but inevitably we are a risk-driven organisation and we focus where there is most risk.”
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