The money laundering regulations are supposed to be a dull but routine part of financial services business, as any Financial Planner will attest.

With this in mind, the story this week about NatWest’s huge money laundering blunders has taken many aback.

The size of the money laundering involved, including an alleged £264m in cash, is staggering but it’s a lesson in what can go wrong when a major company fails on an epic and systemic scale.

Often taken for granted, the money laundering regulations (MLR) remain critical in the war against criminals and their dirty cash and that’s often forgotten.

The MLR is one of the biggest weapons the regulators and the police have in the fight against organised crime.

Criminals are increasingly desperate to launder huge amounts of dirty cash and that led to the MLR. Until this week most of us thought it was a battle being won but the case of NatWest suggests it's actually the criminals who have been winning. They are expert at finding weak spots in the anti-money laundering system. NatWest was one of those weak spots.

I doubt NatWest will sink - it’s part owned by the government. But it has been holed below the water and its needs to do something robust to prove it can be trusted to reject money laundering in future. 

The details of the case are in our story but in essence NatWest admitted allowing one commercial client, Bradford gold dealer Fowler Oldfield, to deposit huge sums with the bank, including allegedly £264m in cash. Fowler Oldfield was closed down after a police raid in 2016. Prior to its closure couriers from the Merseyside area would arrive with holdalls stuffed with cash. It sounds something like a scene out of Line of Duty.

Some people have asked me in the past why the money laundering rules are so important and while they are a drudge they are to my mind front line financial services tools in the war against organised crime. If we are to fight crime and stop criminals stashing away the proceeds of their gains we need money laundering rules, however irritating they are.

Several major criminal activities, including drug dealing, protection rackets and the like generate huge amounts of dirty cash and that needs to be 'cleaned' somewhere. Unfortunately financial services companies have been unwitting targets in the past for major money launderers and that must be tackled.

The disappointing fact, as the NatWest case shows, is that it only takes a small part of the nation's anti-money laundering machine to break down for vast amounts of cash to be laundered.

Interestingly, NatWest has made it clear that there are no individuals at the bank facing prosecution in in the case, and the criminal convictions it admitted to are against the plc, but clearly individuals were involved- the cash did not just walk into a branch by itself. These individuals watched as vast sums of cash were transferred to NatWest without asking enough questions. I hope NatWest has taken action to deal with these failings.

There are lessons to be learned here and the story is not yet over. A potentially record fine awaits NatWest and there will no doubt be a tightening up of the MLR rules at NatWest and elsewhere. 

In the meantime people trying to invest modest lump sums in their pension will be asked more questions than is reasonable about where their money came from and endless forms will be need to filled in. 

The money laundering rules are far from fair, equitable or even completely effective but they are sadly necessary. The consequences of them not working are dire.