UPDATE 1-RBS fined over major risk control failure

* Fined for UK sanctions controls failings

* Failures could have facilitated terrorist financing -FSA

* FSA says fine is biggest to date in this area


LONDON, Aug 3 (Reuters) - Britain's Financial Services Authority (FSA) regulator fined Royal Bank of Scotland RBS.L 5.6 million pounds ($8.9 million) for major breaches in its risk controls which could have facilitated terrorist financing.

The FSA said on Tuesday that RBS, which is 83 percent-owned by the British government, did not have adequate systems and controls in place to prevent breaches of UK financial sanctions.

“By failing to screen relevant customers and payments against Her Majesty’s Treasury sanctions list, Royal Bank of Scotland Group left itself open to the risk that it was facilitating terrorist financing,” Margaret Cole, FSA director of enforcement and financial crime, said in a statement.

RBS said in a statement that it had acknowledged the FSA’s findings and had taken action to strengthen its controls systems.

$1=.6324 Pound Reporting by Sudip Kar-Gupta; Editing by Simon Jessop