RBS's big fine and weak defence are a cause of serious concern

ROYAL Bank of Scotland was yesterday fined - note the word - for failing to have adequate controls in place to prevent breaches of UK sanctions which are designed to prevent institutions from providing financial services to terrorist organisations or regimes which sponsor terror.

It was a further devastating blow to a bank which, under chief executive Sir Fred Goodwin, had been so cavalier in plunging into the world of complex but poisonous financial instruments it had to be rescued from oblivion by the government using billions of pounds of taxpayers' money.

Difficult though it may be for an institution which, under the new leadership of Stephen Hester is later this week expected to report it is turning the corner, one would have expected a substantial degree of contrition.

What we got instead was a demonstration of Orwellian obfuscation which would make even the most cynical political spin doctor blush as RBS issued a statement which said the bank had "reached a settlement" with the Financial Services Authority (FSA), which regulates the industry.

The use of such language is, presumably, meant to suggest to the bank's customers, shareholders (that's mainly us, the taxpayers) and the wider public that this was just a routine matter, a minor transgression, a mere administrative admonition.

It is nothing of the sort. The fact that RBS has tried to pass it off as such cast doubt over the credibility of the much-heralded, and apparently competent, new leadership at the Edinburgh headquartered institution.

Fact: RBS has been found guilty of failing to comply with checks put in place to stop the laundering of money by states like Iran, North Korea and Zimbabwe as well as by terrorist groups like Al-Qaeda and the Taleban.

Yes, the FSA found no evidence that money from any of the proscribed organisations had gone through the systems of RBS, or its subsidiaries NatWest, Ulster Bank or Coutts and Co. That is not the point. In handing out the largest fine imposed to date in pursuit of its financial crime objectives and also the first fine imposed under the new regulations, the FSA was condemning the practices at RBS.

As part of its pathetically weak defence, the bank says that it fully co-operated with the investigations but even this is disingenuous. What else were they to do? Refuse to co-operate?

It is of course the case that these very serious breaches took place in the dying days of Goodwin's tenure at RBS when we know now, though did not know then, that the financial rot which led to the downfall of a once all-conquering banking giant, had already set in.

The FSA fine is further proof, if it were needed, that calls for Sir Fred's rehabilitation are premature.

Of greater concern is that this episode, and the bank's blas response to it, will lead many to conclude the irresponsible arrogance of the Goodwin's ancient regime lives on perniciously, and damagingly, at Gogarburn.