Tougher safeguards to reduce the risk of money laundering via the Post Office have been set out by the City regulator.
The Financial Conduct Authority said its work has brought together agencies including the National Economic Crime Centre (NECC), banks and the Post Office, to address an identified weakness in anti-money laundering controls relating to cash deposits.
The Post Office has been helping to fill in cash access gaps for people and businesses as more bank branches shut.
Under an agreement, many banks offer personal and business customers a range of banking services, including cash deposit services, through the Post Office.
But the NECC estimates that hundreds of millions of pounds is laundered each year through the cash deposit channel at the Post Office.
While banks have made good progress in improving safeguards, there is more work to do, 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— Sheldon Mills, Financial Conduct Authority
The steps set out for banks under the crackdown include a move towards card-based transactions and away from paying-in slips, where possible, to allow enhanced monitoring and reduce opportunities for deposits being made into accounts by third parties.
The sharing of intelligence will also be improved under the plans, so that information is passed on to other firms, law enforcement and the FCA on a regular basis.
Staff will also be trained to spot patterns of suspect activity, the regulator said.
And cash deposit limits at the Post Office will be reduced, subject to customer arrangements, to below the existing limit of £20,000 per transaction.
Some banks had placed over-reliance on the £20,000 limit, the FCA said.
The limit has been abused by criminals making multiple deposits of £20,000 each day to launder large amounts of cash quickly.
For personal accounts, the FCA has proposed a limit of £1,000 per 24-hour period and £10,000 per 12-month period.
Firms should also have considered whether a tailored approach for personal customers is appropriate, the regulator said.
For business accounts, the regulator has asked banks to consider adopting a tailored approach based on expected business customer activity.
Recognising that business customer profiles between banks differ, it was not appropriate to set a single specific limit or approach but rather to ask banks to take a data-led approach using their own customer information, according to the FCA.
The regulator said Post Offices are an important part of protecting access to cash for people and small businesses – and the FCA’s research indicates 6% of adults in the UK used cash to pay for everything over the 12 months from May 2021, rising to 9% of people in vulnerable circumstances.
While most people have reasonable access to cash, it is vital that any money laundering protections do not get in the way of legitimate customers and businesses accessing services at the Post Office, the regulator said.
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.
“This important work is part of the FCA’s three-year strategy on reducing financial crime and increasing consumer protection.”
It is crucial that the additional controls required for cash deposits at the Post Office do not disproportionately impact legitimate customers, the regulator said.
The FCA said it expects banks and the Post Office to keep their controls under review to ensure they are proportionate to the risk and suitable for their customer base, using data to refine measures where needed as the money laundering risks evolve.
The regulator will test the safeguards put in place and this work will consider whether firms have taken steps to protect access to cash at the Post Office for legitimate customers.
A Post Office spokesperson welcomed the announcement, saying: “We have been warning since last December that cash deposit limits were having a detrimental impact on lawful deposits and withdrawals at post offices.
“Legitimate customers should not be unfairly penalised by having to travel many miles to city or town centre bank branches and be excluded from the essential local provision of cash and banking services that post offices provide.”
The spokesperson said there remains much more for the industry to consider, “including a proper exceptions process to verify customers, as well as individual account checking by banks to further exclude money launderers, while enabling bank-approved customers to use post offices’ vital services”.
