NATIONAL Savings & Investments, the Government-backed financial institution, could provide a lucrative haven for money launderers because of a loophole in the law, a leading financial expert has told The Times.

The savings institution, where more than £66 billion is invested, is vulnerable to money launderers looking to wash millions of pounds worth of dirty money each year because it is not regulated by the main City regulator, accountants and other experts warned.

National Savings does not fall under the Financial Services Authority’s (FSA) money-laundering rules, unlike other banks. The rules, which require banks to have a money laundering officer and follow strict internal procedures, are heavily enforced by the FSA and are one of the biggest motivators for financial institutions to clamp down on financial crime.

Jeffrey Robinson, a money-laundering expert and author of The Sink, an exposé of the money-laundering industry, said his biggest concerns lay with NS&I’s premium bond products — savings products in which individuals are given the chance to win a prize. They are held by more than 23 million people.

He claims that launderers target bond winners, offering them cash in return for their prize cheque. They then take the cheque, deposit it in a bank account under a false name and send it offshore.

“If the UK is to win the fight against money laundering all financial institutions, including National Savings, need to be forced to be 110 per cent vigilant,” Mr Robinson said. “This is one of several black holes in the UK and wherever you have a black hole money launderers will exploit it.”

John Davies, head of business law at the Association of Chartered Certified Accountants (ACCA), said: “We have the situation where a substantial financial organisation has an inferior level of regulatory controls over money laundering than those imposed on its competitors.

“If the Government feels that all the other banks and building societies need to be subjected to these regulatory controls then surely the same logic should be applied to National Savings.”

Other banks face fines or even prosecutions under civil law if the regulator finds that they are breaching its rules. Last week Abbey National was fined £2 million for breaking the rules.

The NS&I must comply with the Government’s more general money-laundering regulations which were introduced last year and contain similar measures to those laid down by the FSA.

But accountants are concerned that the lack of independent policing may make National Savings more relaxed about money laundering than its competitors. The only body to which the the savings group is answerable is the Treasury.

The accountants’ fears have been compounded by NS&I’s low level of “suspicious activity” reports to the National Criminal Intelligence Service (NCIS), to which institutions must report concerns about money laundering.

The NCIS’s latest report shows that major banks account for about 61 per cent of money-laundering reports but National Savings, the second biggest savings institution in the UK, makes up less than 5 per cent of reports.

National Savings denied that it was at risk from money launderers. “The simple fact that we are not regulated by the FSA does not mean we do not follow their ‘best practice’ guidelines,” a spokesman said.

“The requirement to have best endeavours to prevent money laundering is enshrined in law and if we were suspicious that an attempt to launder money was taking place, we would report this to the appropriate authorities.”