17 September 2013

FCA fines bank £525,000 for AML systems and controls failings relating to higher-risk customers

Harvey Knight
Partner | UK

The FCA has published a final notice to Guaranty Trust Bank (UK) Ltd imposing a fine of £525,000 for breach of Principle 3 of the FCA’s Principles for Businesses (PRIN).

The Bank, which is a wholly owned subsidiary of a Nigerian financial services institution, has also breached rules 6.1.1 and 6.3.1 of the FCA’s Senior Management Arrangements, Systems and Controls sourcebook (SYSC).

The FCA found that between May 2008 and July 2010, the Bank failed to take reasonable care to establish and maintain effective anti-money laundering (AML) systems and controls in relation to customers the Bank identified as presenting a higher risk of money laundering or terrorist financing for the purposes of the Money Laundering Regulations 2007 (MLRs). In particular, during the relevant period the Bank did not:

  • Maintain adequate and risk sensitive systems and controls to identify, assess and manage potential money laundering risks.
  • Carry out and document adequate customer due diligence (CDD), and carry out enhanced due diligence (EDD) when establishing relationships with higher-risk customers.
  • Screen customers against HM Treasury’s financial sanctions lists or politically exposed person (PEP) databases prior to commencing the relationships.
  • Obtain and document senior management approval to establish relationships with each PEP.
  • Conduct the appropriate level of on-going monitoring for its existing higher-risk customers.

The FCA considers that the Bank’s failings were serious for a number of reasons. They were systemic and resulted in an unacceptable risk of the Bank handling the proceeds of crime. The Bank did not identify the failings despite the (then) FSA issuing final notices to other firms for financial crime failings during the relevant period. In addition, the Bank provided services to a significant number of higher-risk customers, acting as a gateway to the UK financial system for customers, most of which emanated from jurisdictions identified by recognised sources as posing a higher risk of money laundering, bribery or corruption.

Concerns about the Bank were identified during the FSA’s 2010/11 thematic review of how banks manage money laundering risk in higher-risk situations. As the FCA intends to increase its use of thematic reviews as part of its enforcement strategy, firms are urged to take seriously any findings of thematic reviews and use those findings to enhance their existing internal systems and controls.

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