Councillors query officers "due diligence" over £5 million bank investment

The Financial Conduct Authority fined the British founded and based Al Rayan bank £4 million in January “for failing to put in place adequate anti-money laundering (AML) controls”.

SNP group leader Councillor Janet Campbell asked council Finance Chief Patrick Welsh if “due diligence” had been carried out.

Mr Welsh was giving a meeting of the full council an update on treasury management on Tuesday morning.

He said all investments were made within regulation and promised to provide a further report to councillors.

Linlithgow SNP councillor Pauline Orr told the meeting Al Rayan is a commercial bank in the UK established to offer Sharia-compliant financial service products.

She added: “I have risk-based concerns about this bank because it is on public record that in January the FCA fined the Al Rayan bank £4 million for failing to put in place adequate anti- money laundering controls.

“Was the administration aware of this. If so, what actions were taken as soon as this was known?

“When we are talking about anti-money laundering controls this means insufficient scrutiny was taking place on transactions, customer due diligence from document and data reporting and inadequate training was provided for staff in relation to the law relating to money laundering and how to recognise and deal with these transactions.

“What assurance can the administration provide to their voting public that monies you hold on their behalf are safe?”

Mr Welsh said: “The Local Government Scotland investment regulations require local authorities to specify what investments will be used and local government must comply with those investments that are specified in regulations.

“The permitted investments include the current investment and long term investments, share capital in companies and loans to third parties. The investments set out on page 11 [including the Al Rayan investment] are consistent with local government investment regulations.”

Councillor Orr replied: “That’s not the question I asked. I asked if the administration was aware the FCA had fined the Al Rayan bank?”

Mr Welsh replied: “That is something that we will look into further.”

A spokesman for the council said: “The council will only lend money to or invest with those counterparties that are on its approved lending list.

“The approved lending list only permits investments in UK based financial organisations that are appropriately rated by the independent credit rating agencies.”

An Al Rayan Bank spokesperson said: “The FCA identified historic weaknesses in the bank’s financial crime systems and controls that date back to a period between 2015 and 2017. The FCA found no evidence of any money laundering or other criminal activity by the bank nor its customers and none of the bank’s existing management were in a senior management function at the time.

“All identified weaknesses have been fully resolved with the support and assistance of external experts.”