David Hamilton of Pinsent Masons, who specialises in financial regulation, was commenting after the FCA imposed fines totalling more than £11.5 million on Guaranty Trust Bank (UK) Limited
and Al Rayan Bank PLC for AML failings.
The FCA fined Guaranty Trust Bank £7.67m (50-page / 310KB PDF) after it identified “serious weaknesses in the institution’s AML systems and controls between October 2014 and July 2019. The regulator said the bank “failed to undertake adequate customer risk assessments, often not assessing or documenting the money laundering risks posed by its customers” and “failed to monitor customer transactions and business relationships to the required standard”. It said the issues were “repeatedly highlighted” to the bank by people inside and outside of the organisation – including at the FCA – but that the bank “failed to take appropriate action to fix them”.
Al Rayan Bank was fined £4.02m (68-page / 480KB PDF) after deficiencies were found in its AML controls during the period between 1 April 2015 and 30 November 2017. The FCA said that the bank “allowed money to pass through the bank and be used within the UK without carrying out appropriate checks”. Adequate checks on its customers’ source of wealth and on the source of funds were not carried out, and the regulator said that a lack of proper training for staff on how to handle large deposits “further heightened the risk of money laundering and financial crime”. Al Rayan, like Guaranty Trust Bank, failed to address weaknesses flagged to it, according to the FCA.
Hamilton said: “Although enforcement cases take time to conclude – on average around two and a half years – and invariably relate to historical conduct, it is nevertheless notable that the actions against Guaranty Trust Bank and Al Rayan Bank come hot on the heels of several high profile financial crime cases in 2021 and 2022.”
“The concentration of AML systems and controls-related fines across a range of large, mid-level, and small banks, brokers and traders demonstrates the FCA’s priorities in this area; priorities that were highlighted in the regulator’s ‘Dear CEO’ letter to retail banks in May 2021. That letter provided firms with a breakdown of control weaknesses the FCA had identified, with a particular focus on governance and oversight, risk assessments, due diligence, transaction monitoring and suspicious activity reporting,” he said.
“It is therefore unsurprising that the latest cases concentrate on inadequate customer onboarding checks – including enhanced due diligence on higher risk customers; failures to establish, verify and evidence source of funds and wealth; gaps in ongoing monitoring of customer relationships; and inadequate AML training for staff,” Hamilton said.
Hamilton said the enforcement drive is a reminder to firms of the importance of implementing a “culture of compliance”, and he said the case of Guaranty Trust Bank also highlights what the consequences for firms can be if they are found to have repeatedly breached their regulatory obligations.
Hamilton said: “In this case, the bank had been fined £525,000 by the FCA in 2013 for similar AML breaches and had then failed to address known ongoing failings – in spite of FCA visits in 2014 and 2017. The FCA treated these as aggravating factors and increased the fine by 40% before multiplying it still further – by a multiple of 1.75 – as an ‘adjustment for deterrence’, which is a subjective and unscientific assessment designed to encourage others in the market to get their own houses in order.”