Standard Bank fined £7.6m by FCA

Published on

Financial Conduct Authority

The Financial Conduct Authority (FCA) has fined Standard Bank PLC (Standard Bank) £7,640,400 for failings relating to its anti-money laundering (AML) policies and procedures over corporate customers connected to politically exposed persons (PEPs).

Standard Bank is the UK subsidiary of Standard Bank Group, South Africa’s largest banking group. Standard Bank Group is an international banking group with extensive operations in 18 African countries and operations in 13 other countries outside of Africa.

This is the first AML case the FCA, or its predecessor the Financial Services Authority (FSA), has brought focused on commercial banking activity. This is also 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.

Tracey McDermott, director of enforcement and financial crime, said: “One of the FCA’s objectives is to protect and enhance the integrity of the UK financial system. Banks are in the front line in the fight against money laundering. If they accept business from high risk customers they must have effective systems, controls and practices in place to manage that risk. Standard Bank clearly failed in this respect.”

Between 15 December 2007 and 20 July 2011, Standard Bank failed to comply with Regulation 20(1) of the Money Laundering Regulations because it 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.

As with any financial services activity, commercial banking business can be used to launder money, particularly in the layering or integration stages of the money laundering process. In order to prevent financial crime, banks operating in this sector must have effective AML systems and controls in place ensuring 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 a sample of 48 corporate customer files, all of which had a connection with one or more PEPs. The results of this review highlighted serious weaknesses in the application of Standard Bank’s AML policies and procedures.

This meant that it did not consistently carry out adequate EDD measures before establishing business relationships with corporate customers that had connections with PEPs. It also failed to conduct the appropriate level of ongoing monitoring for existing business relationships by keeping customer due diligence up to date.

The FCA considers these failings to be particularly serious because Standard Bank provided loans and other services to a significant number of corporate customers who emanated from or operated in jurisdictions which have been identified by industry recognised sources as posing a higher risk of money-laundering.

In addition, Standard Bank identified issues relating to its ability to conduct ongoing reviews of customer files early in the relevant period, but failed to take the necessary steps to resolve the issues. The FCA has previously brought action against a number of firms for AML deficiencies and has stressed to the industry the importance of compliance with AML requirements.

The weaknesses in Standard Bank’s AML systems and controls resulted in an unacceptable risk of Standard Bank being used to launder the proceeds of crime.

Standard Bank and its senior management have co-operated with the FCA investigation and have taken significant steps at significant cost towards remediating the issues identified, including seeking advice and assistance from external consultants.

Standard Bank settled at an early stage of the investigation and qualified for a 30% discount on its fine. Without the discount the fine would have been £10.9 million.

Latest POLL

COMMENT ON MORTGAGE SOUP

We want to hear from you!
Leave a comment and get the conversation started.
You need to register to post, so please login or sign up below.

Latest articles

Square 1 Media announces May Mortgage Market Debate

Square 1 Media is to hold its next Mortgage Market Debate on Wednesday, 21 May,...

Coventry BS maintains status as one of the best workplaces

Coventry Building Society has been named one of Great Place to Work's UK’s Best...

Atom bank breaks Near Prime record

Atom bank has reported another record-breaking month for Near Prime activity. Over the course of...

Berkeley Alexander appoints new BDM

General insurance provider Berkeley Alexander has announced the appointment of Grant Robinson as a...

Other news

Lenders must step up on high LTV products

Things are on the up for borrowers with a smaller deposit. The financial information...

Square 1 Media announces May Mortgage Market Debate

Square 1 Media is to hold its next Mortgage Market Debate on Wednesday, 21 May,...

Coventry BS maintains status as one of the best workplaces

Coventry Building Society has been named one of Great Place to Work's UK’s Best...