ROYAL Bank of Scotland was fined £5.6m yesterday after lax controls put the banking group at risk of laundering money for terrorists.

The Financial Services Authority said part-nationalised RBS and its NatWest, Ulster Bank and Coutts arms all failed to screen their customers and payments against the UK financial sanctions list between December 2007 and December 2008.

The breaches of money laundering regulations by RBS – which releases its results on Friday – resulted in an “unacceptable” risk that the group could have carried out transactions involving sanctions targets, the authority said.

It comes ahead of another taxpayer funded bank, Lloyds Banking Group, releasing its results today, in which it is expected to reveal a marked turnaround.

City experts predict Lloyds will report interim pre-tax profits of more than £800m in a bounce back from the £4bn in losses seen a year earlier after the HBOS takeover left it with mammoth bad debts.

But Lloyds, 41 per cent owned by the Government, is likely to face scrutiny over its business lending targets amid growing political pressure.

Internet bank Egg, which has more than two million UK customers, is to be put up for sale by Citigroup, which bought it in 2007, for about £500m it was reported last night.