Sat, Feb 1,2014

http://www.complianceweek.com/uk-regulator-fines-standard-bank-76m-for-anti-money-laundering-lapses/article/331642/

The United Kingdom's banking regulator this week fined Standard Bank PLC £7.6 million for lapses in its anti-money laundering policies, marking the first AML sanctions related to commercial banking in Britain.

The shortcomings involved the bank's anti-money laundering (AML) procedures in dealing with corporate customers connected to politically exposed persons, according to the U.K.'s Financial Conduct Authority. The FCA also said it was the first case to be brought under the new penalty regime, which goes back to infractions committed since March 2010.

Standard Bank is the U.K. arm of South Africa-based Standard Bank Group, which is the largest banking group in South Africa with operations in 31 countries around the world. According to the FCA, Standard Bank failed to take steps to ensure all aspects of its AML policies were being applied appropriately to corporate customers connected to politically exposed persons (PEPs) for the period between 15 December 2007 and 20 July 2011.

Regulatory guidance from the Joint Money Laundering Steering Group calls for corporate customers with links to PEPs to be placed in a higher risk category and be subject to enhanced due diligence. During the period in question, Standard Bank had 5,339 corporate customers, including 282 with connections to one or more PEPs, the FCA said.

The FCA reviewed the files for 48 of those 282 customers, as well as the bank's AML policies and procedures. The review uncovered “serious weaknesses” in the application of the AML procedures, the FCA said. Among those weaknesses were failing consistently to conduct enhanced due diligence before entering into business relationships with corporate customers connected to PEPs, and to engage in appropriate ongoing monitoring of existing business relationships by updating its due diligence.

“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,” the FCA said in its release.

The FCA said the bank's shortcomings were considered particularly serious because the bank gave loans and provided services to a large number of corporate customers hailing from or operating in locations deemed to be higher risk for money laundering; the bank knew of difficulties in conducting ongoing reviews of customers files early in the timeframe investigated but failed to take sufficient steps to resolve the issues; and the FCA had stressed the importance of AML compliance to the industry, including actions against several firms for AML lapses.

 “One of the FCA's objectives is to protect and enhance the integrity of the U.K. financial system,” Tracey McDermott, the FCA's director of enforcement and financial crime, said in a statement. “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.”

The FCA acknowledged the bank and its senior management cooperated in the investigation and went to significant lengths and expense to remediate the problems. The bank's decision to settle early in the investigation led to a 30 percent discount on the fine, the FCA said. The original penalty was £10.9 million.

According to Reuters, Standard Bank said that since 2010 the institution has increased resources for AML compliance, undertaken a compliance and business review, and updated the files of active clients. The bank also noted the FCA did not accuse it of actually handling proceeds from crimes.