Watchdog's laundry list is a washout

Here we go again. The heavy hand of the Financial Services Authority has felt the collar of yet another organisation and slapped a £1.25 million fine on it for breaching money laundering protocols.

This time it is Bank of Scotland, part of HBoS, that will have to dig deep. A couple of weeks ago Abbey received its demand from the FSA for a record £2.3 million.

And Andrew Proctor, enforcement director of the agency, could barely contain his glee as he announced the fact that insurers, managed funds and securities houses are next in line to be targeted in his policing of anti money-laundering procedures.

The FSA got this bee in its bonnet when it discovered that more than £700 million had been laundered through London banks by friends and family of the late Nigerian dictator Sani Abacha.

Yet there is scant evidence that all the fines imposed, the swathes of paper generated in the struggle to conform with the FSA's demanding regulations, and the staggering compliance costs being borne by financial institutions, have made any real impact on detecting money-launderers.

The police seem confused by the information now cascading in their direction from finance houses and they certainly do not appear to share the FSA's sense of priority over trapping the villains.

With no conspicuous successes to trumpet, the watchdog's zeal looks dangerously like achieving little more than making life miserable for the millions who use financial services.

Consumers attempting even the most basic of financial transactions are now caught in this web of nonsense. You may have banked with the same institution for 20 years, but try to buy a share rather than write a cheque and you have to go through the rigmarole of providing evidence of who you are as though you were a new customer.

And the FSA can hardly argue that it would be beyond the wit of a sophisticated money-launderer to fake convincing identification - after all, how much skill does it take to knock out a few utility bills?

With the FSA's role - or lack of it - likely to come in for heavy criticism in the Penrose report into the Equitable Life meltdown, the enforcers at Canary Wharf would do better to spend their time working on ways to catch the next mis-selling scandal before it happens rather than after.