04 February 2014

Bank fined for failures in its AML controls

Harvey Knight
Partner | UK

The FCA has published the decision notice it has issued to Standard Bank plc, fining it £7,640,400 for failings relating to its anti-money laundering (AML) policies and procedures over corporate customers connected to politically exposed persons (PEPs). This is the first AML case to use the new penalty regime, which applies to breaches committed from 6 March 2010. Under the new regime larger fines are expected.

The FCA found that between 15 December 2007 and 20 July 2011, Standard Bank had failed to comply with Regulation 20(1) of the MLRs because it had failed to take reasonable care to ensure that all aspects of its AML policies were applied appropriately and consistently to its corporate customers connected to PEPs.

On the basis that commercial banking businesses can be used to launder money, particularly in the layering or integration stages of the money laundering process, the FCA emphasised that banks conducting this type of business must have effective AML systems and controls in place to ensure that all the participants in commercial banking transactions are subjected to effective and appropriate due diligence. This is particularly important where the transaction involves PEPs or other high-risk customers.

Guidance issued by the Joint Money Laundering Steering Group (JMLSG) provides that where a corporate customer is known to be linked to a PEP, such as through a directorship or shareholding, it is likely that this will put the customer into a higher-risk category, and that enhanced due diligence (EDD) measures should therefore be applied. During the relevant period, Standard Bank had business relationships with 5,339 corporate customers of which 282 were linked to one or more PEPs.

The FCA reviewed Standard Bank's policies and procedures and the results of this review highlighted serious weaknesses in the application of Standard Bank's AML policies and procedures. Standard Bank failed to consistently:

  • Carry out adequate EDD measures before establishing business relationships with corporate customers that had connections with PEPs.
  • Conduct the appropriate level of ongoing monitoring for existing business relationships by keeping customer due diligence up-to-date.

This case highlights the FCA's increasing focus on finance crime and serves as a reminder to all firms subject to the AML rules to ensure its processes are up to date and are aligned with the JMLSG guidance where appropriate.

Category: Article