Just over a month ago the Financial Conduct
Authority (FCA) took over the reins from the Financial Services Authority, and
practitioners have been waiting with some interest to see what approach the new
body will take to regulation. And first
signs are that they will be tough.
On 24th April, the FCA fined EFG Private
Bank Ltd £4.2 million for failing to take reasonable care to manage money
laundering (AML) risks. The failings were serious and lasted for more than
three years. The fine would have been £6
million had it not been for an early settlement discount of 30% agreed between
the bank and the regulator.
The bank is the UK private banking subsidiary of a
global private banking group, based in Switzerland, and as such is a gateway
for access to the UK banking system.
The FSA visited the bank in January 2011 as part of a thematic review of
how UK banks were managing money laundering risks. It considered 99 files of customers
identified by EFG as being higher risk customers. Of these, 54 related to Politically Exposed
Persons (PEPs). 36 files which had been opened between 15 December 2007 and 25
January 2011 were reviewed and 17 contained due diligence documents which
identified significant risks of money laundering, but failed to document what
was done to mitigate those risks. 13 of
those 17 files contained allegations of criminal activity including corruption
and money laundering. The report found that EFG had not put into practice their
own AML policies, had not completed adequate due diligence checks or taken
appropriate steps to monitor and mitigate the risks identified.
EFG is not the first bank to be fined for inadequate money laundering
processes – Coutts, Habib and Turkish Bank (UK) have all faced similar sanctions
in 2012. But the first action taken by
the new regulator (albeit based on a review by its predecessor regulator) will
send an important signal to the financial community that breaches will be
identified and dealt with in a strong manner.
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