Steve O'Neill: An embarrassment - and a cause for concern

NORMALLY, the big high street banks are really hot on this issue, so the fact that these breaches have been found is really very embarrassing for the RBS Group.

In the UK as a whole, we have got a good record on this, but for RBS, which is dealing with money from all sorts of jurisdictions, not to have the proper checks in place does not look good.

The regulations designed to crack down on money laundering and the financing of terrorism have been introduced to protect the UK financial system. Businesses, including RBS, that are covered by the regulations must put in place certain controls to prevent it being used for money laundering by criminals and terrorists. These include appointing a "nominated officer", (in RBS's case, there will be several deputies in a big compliance department), checking the identity of customers and keeping all relevant documents. They must also report any suspicious activity to the Serious Organised Crime Agency.

The rules also state that businesses must carry out regular assessments of the adequacy of their systems and controls to ensure that they manage the money-laundering and terrorist-financing risks effectively and are compliant with the Money Laundering Regulations 2007. RBS is one of the largest UK institutions that handles these kind of transactions and it is a worry that such a big bank has been found in breach of the regulations.

The truth of the matter is that such breaches are incredibly rare in large financial institutions, because they tend to have large compliance departments. Amongst smaller companies, they are far more common. There were almost 1,000 firms found to have committed some sort of breach last year in the UK. Although a breach is more likely to be found in a small firm, they tend not to be too serious. When it happens in a larger institution, it is something to be worried about.

• Steve O'Neill is a compliance expert with the Business Tax Centre.