Bank heavily fined by FCA for failings in money-laundering controls

Redmans Solicitors
August 13, 2013

A London-based bank has been heavily fined by the Financial Conduct Authority (“FCA”) for failures relating to its anti-money-laundering controls.

Guaranty Trust Bank Ltd (“GTB”) was fined over £500,000 by the FCA earlier this month for numerous and systematic failures to put in place procedures to monitor the risk that potential money launderers posed to the bank.

The bank, which is a subsidiary of Nigerian Guaranty Trust Bank plc, was set up in the UK in May 2008, with its head office based in London. It offers retail and wholesales banking products to private, corporate and institutional clients but the Financial Services Authority – the predecessor of the FCA – started to investigated the bank in 2010 after allegations relating to its money-laundering procedures came to the surface.

The FCA conducted a thorough review of GTB’s money laundering procedures and this raised significant concerns at the regulator. A full review and investigation was therefore undertaken, with the FCA finding that the bank had failed to implement effective anti-money-laundering procedures, including failures to:

Assess or document potential money-laundering risks posed by higher-risk customers
Review the activity on customers’ accounts and ensure that the information held on the databases was up to date
Compare potential customers against sanction lists or databases to screen potential money launderers
Gain information from prospective clients as to why they wished to open an account or do business with the bank or ask questions relating to the source of high-risk customers’ wealth or funds

The FCA believed that the above failures constituted a breach of the bank’s obligations under FCA Principle 3, which requires firms to take reasonable care to organise and control their affairs responsibly and reliably. This was based on the FCA’s belief that the failures meant that the bank was not able to effectively assess or understand the activities of higher-risk customers.

The FCA’s director of enforcement and financial crime, Ms Tracey McDermott, stated: “Banks are at the front line in ensuring the proceeds of crime do not enter the UK financial system. GT Bank’s failures were serious and systemic and resulted in an unacceptable risk of handling the proceeds of crime.”

There does not appear to have been any comment from GTB (UK) Ltd’s criminal defence solicitors at the time of the writing of this article.

Chris Hadrill, a solicitor based at Redmans, commented: “Banks – and other financial institutions – have an obligation to comply with the Financial Conduct Authority’s rules. If financial institutions fail to do so then they may face proceedings from the FCA.”

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