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The Financial Conduct Authority (FCA) has announced a new series of measures that are designed to reduce the risk of money laundering through Post Office banking services.
In partnership with the National Economic Crime Centre (NECC), the FCA is asking banks to consider adjusting the terms of their Post Office banking agreements to help fight cash-based money laundering.
The FCA’s proposals include reducing cash deposit limits at Post Office branches to below their current level of £20,000 per transaction.
At present, the £20,000 per transaction limit applies only to personal account customers, and there is no limit to how many cash deposits a customer can make in a single day.
According to the NECC, this has led to the cash deposit service being abused by criminals, who have used it to launder “hundreds of millions of pounds” since 2020, as per the agency’s estimates.
Going forward, the FCA has proposed that banks reduce cash deposit limits to £1,000 per transaction per day for individuals, and no more than £10,000 over a 12-month period.
Currently, there are no limits for business accounts when depositing cash using Post Office branches, and the FCA has said it considers this to be appropriate.
Instead, the FCA has asked banks to use a “data-led approach” to impose reasonable controls on cash deposits by businesses.
Speaking to VIXIO, an FCA spokesperson said: the “key point” is that different banks have different customer profiles that cannot be accommodated by a one-size-fits-all policy.
“What is a suitable limit for a big bank with large cash-intensive business chain customers might not be the same as what is a suitable limit for the customers of a smaller bank,” he said.
“We are asking the banks to use their own customer data to determine appropriate limits for their customer base — such as type of customer and frequency of transactions.
“A key theme underpinning all of this is making sure legitimate customers can still deposit.”
Other recommendations
Other recommendations put forward by the FCA include “moving away” from paying-in slips and ensuring that card-based transactions are used where possible when depositing cash.
Currently, only seven of the 30 banks that offer Everyday Banking via the Post Office allow personal accounts to deposit cash using only a paying-in slip, while 14 banks allow this for business accounts.
The FCA also urged banks to improve their transaction monitoring capabilities, speed up submissions of suspicious activity reports (SARs) and share data with the FCA, other firms and law enforcement.
Nick Parfitt, anti-money laundering lead at financial risk ops platform Feedzai, said the FCA’s recommendations highlight “fundamental areas” where banks’ risk strategies, monitoring and reporting systems will need to change.
“Technology is a key enabler to achieving this through the use of advanced analytics, machine learning and AI, as well as being able to operate at scale given the huge transaction volumes the Post Office generates,” he said.
“Network analysis of Post Office branches, transactional and customer pattern analysis coupled with the ability to share SAR intelligence between member banks requires advanced technology and tooling.”
He also noted that although data-sharing has traditionally been a “core capability” for fraud prevention, it is “big change” for the prevention of money laundering.
Are the FCA’s recommendations proportionate?
For some observers, the FCA’s recommendations are excessive. Ron Delnevo, chair of the UK Payment Choice Alliance, told VIXIO that the £1,000 per transaction limit for individuals is needlessly low, given the lack of data behind it.
“Is this genuinely a major concern or are there elements of a scare story here,” he said. “What are the actual money laundering figures as a percentage of those cash deposits?
“Dramatic and colourful headlines about ‘Colombian drug cartels’ capture the public's imagination — but what’s the reality behind the headlines?”
Aside from the NECC’s “estimates” quoted above, the FCA’s announcement included a reference to data published in 2020 by the UK Financial Intelligence Unit (UKFIU).
At the time, the UKFIU said it had seen an increase in suspicious cash deposits at Post Office branches.
In the first five months of 2018, the agency said it received 373 SARs related to these transactions, and in the first five months of 2018 it received 710, almost double.
However, the agency did not state how many of these SARs ultimately led to prosecutions or convictions.
“The NECC should be required to validate their estimates,” said Delnevo. “Or are we going to be told that ‘for security reasons’ we cannot be given more details?”
He added that “99.9 percent” of cash depositors are not money launderers, but this reality is not reflected in the FCA’s recommendations.
“Cash has to be the ‘Big Bad Wolf’,” he said. “Even though — as the government conceded in a new bill — it is digital scams that are costing the British billions of pounds each year.”
