Standard Bank has been fined £7.6 million by the Financial Conduct Authority (FCA) for failings relating to its anti-money laundering systems.
An investigation by the FCA revealed that between December 2007 and July 2011, Standard Bank, the UK subsidiary of South Africa's Standard Bank Group, did not have appropriate anti-money laundering (AML) policies applied to corporate customers with links to prominent public figures.
The review highlighted “serious weaknesses” in AML procedures, including failing to carry out adequate due diligence measures before dealing with customers connected to clients with a high risk of money laundering.
There were also systemic weaknesses in the firm’s management and internal control systems, which prevented monitoring of unusual account activity for all of its customers, not just those considered high risk.
The failings related to inadequate IT systems, the FCA said, and resulted in an “unacceptable risk” of Standard Bank being used to launder the proceeds of crime.
Standard Bank confirmed to ComputerworldUK that it has upgraded its compliance and monitoring IT systems following to the FCA review, and has brought in external consultants to improve its AML procedures.
The banks said in a statement that since 2010 it has embarked on ”an extensive remediation plan” including:
- refreshing all active client files
- conducting a compliance and business review of all active customer relationships
- significantly increasing the resources of its anti-money laundering compliance function
- introducing an electronic client on-boarding system to assist with the consistent application of the bank's policies”.
By agreeing to the settlement at an early stage Standard Bank avoided a fine of £10.9 million.
The fine is the first anti-money laundering case focused on a commercial banking activity, and is the first since the new, stronger penalties came into play for breaches committed after March 2010.
"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," said Tracey McDermott, director of enforcement and financial crime.
“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."
In 2012 the FCA’s predecessor, the Financial Services Authority, fined RBS’ private banking subsidiary Coutts & Company £8.75 million for its failure to establish and maintain effective anti-money laundering (AML) systems and controls for nearly three years.