Everyone is aware money laundering is a global issue and there is even an international body based in Paris called the Financial Action Task Force (FATF) who is considered the global money laundering and terrorist financing watchdog. All countries including Canada and its Five-Eyes compatriots must fall in line and work collaboratively and together on addressing this insidious and pervasive black mark on humanity if we are serious about making progress.
One country making some bold moves in this regard to stop money laundering from happening in the first place is the UK, and an area of real focus, is on consumers of financial services and the firms responsible for them. The new Consumer Duty is a case in point and a recent bulletin from the UK’s Financial Conduct Authority (FCA) gets to the heart of how far they are prepared to go to hold financial firms accountable for creating better outcomes for all consumers, including those determined to be most vulnerable.
Seniors/retirees and older people certainly fall into the category of vulnerability for numerous reasons including the fact they have amassed money and savings for retirement so tend to be a good target of fraudsters to remove them of their nest eggs and what can be significant amounts of money in the hundreds of thousands of dollars. Without proper care, attention and due diligence by consumers and their financial institutions as they are often the last line of defense, and should be doing their part based on anti-money laundering regulations and customer care (e.g. Know Your Client) to look out for suspicious transactions, this money can be moved in quick fashion to offshore destinations to feed terrorism and all sorts of criminal activity such as human trafficking.
What is revealing, timely and informative is the way the UK looks at vulnerable consumers as it is not simply age related but being in a situation that makes you vulnerable to potential harm. There is much evidence to inform the FCA of situations such as Authorized Push Payments (APPs) where the scammers manipulate and deceive a consumer to send money themselves to what ends up being a fraudulent or mule account set up for the express purpose of laundering money.
Let me take you through a strong but brief synopsis the FCA has put together which boils down its position on vulnerable consumers and how they are approaching it with their financial firms which include the retail banks. It is all about treating vulnerable customers fairly and making it abundantly clear financial firms need to be accountable for doing just that. Making excuses and blaming the victim is not part of this mandate.
Protecting vulnerable consumers is a key focus for the FCA. We want vulnerable consumers to experience outcomes as good as other consumers and to receive consistently fair treatment across the firms and sectors we regulate.
What do we mean by vulnerability?
Someone who due to their personal circumstances is especially susceptible to detriment, particularly when a firm is not acting with appropriate levels of care.
Anyone can find themselves in vulnerable circumstances at any time. This makes it relevant to firms serving most types of retail customers. Key drivers of vulnerability in financial services are health, life events, capability, and resilience.
What does this mean for financial firms?
Firms must treat vulnerable customers fairly to comply with the Principles of Business.
Vulnerable consumers may be more likely to have additional or different needs which if not met by firms, could limit their ability to make decisions or to represent their own interests. So, the level of care that is appropriate for these consumers may be different from that for others.
Firms should take particular care to ensure they meet the needs of vulnerable consumers at the greatest risk of harm. Our guidance shows firms the types of actions to take to understand and respond to vulnerable customers’ needs.
Firms need to do the right thing for vulnerable consumers and embed this in their business model, culture, policies, and processes.
If firms do not take action to respond to customers’ needs appropriately, for example in their customer service and product design, it could cause vulnerable customers’ avoidable harm.
What firms should do to understand the needs of their target market/customer base.
Ensure staff can recognize and respond to the needs of vulnerable customers.
Respond to customer needs through customer service and product design and communications.
Monitor whether they are meeting the needs of vulnerable customers and take action.
FCA will monitor how firms are treating vulnerable customers and hold them to account.
Firms can expect to be asked to demonstrate how their business model, their culture and the actions they have taken ensure the fair treatment of all customers, including vulnerable customers.
Two good links to check out more on vulnerability and ageing from the UK can be found when you click on them. The bottom line is the UK is showing other countries like Canada, how they must do more along the lines the FATF is looking for, to prevent money laundering from being so problematic in the consumer retail banking environment.
In addition, and this should be just as important to financial institutions, government and its regulators, and society as a whole, financial institution delivery of better customer outcomes must be a priority including those more vulnerable to suffering financial harm as the UK clearly recognizes and is doing something to address it.
