Crime prevention is essential to market confidence
Last month the FSA fined a privately-owned Swiss bank – Habib Bank AG Zurich, which has 12 branches in the UK – £525,000 and its former money laundering reporting officer £17,500 for failure to take reasonable care to establish and maintain adequate anti-money laundering systems and controls.
The failings at the fined Habib Bank AG Zurich lasted almost three years and the FSA found that it exposed the bank to an unacceptable risk of laundering money.
Approximately 45 per cent of its customers were based outside the UK and about half of its deposits came from jurisdictions which, according to independent international organisations, had less stringent anti-money laundering system requirements or were perceived to have higher levels of corruption than the UK.
The FSA’s investigation identified that during the period December 2007 to November 2010, the bank failed to establish and maintain adequate controls for assessing the level of money laundering risk posed by its customers.
In particular the bank maintained a high-risk country list that excluded certain high-risk countries on the basis that it had group offices there.
The FSA was satisfied that the bank’s local knowledge of these countries did not negate the higher risk of money laundering they presented.
The regulator also found that the bank failed to conduct adequate enhanced due diligence in relation to higher-risk customers.
In two-thirds of the 68 customer files it reviewed, the FSA found one or more of the following significant failings:
* The account had been inappropriately classified as normal risk.
* The enhanced due diligence conducted was inadequate, in that insufficient information or supporting evidence had been gathered.
* The enhanced due diligence had not been conducted prior to transactions occurring on the account.
The FSA imposed the financial penalty on the money laundering reporting officer for failing to ensure that the anti-money laundering systems and controls were adequate. He has now retired from the financial services industry.
The FSA imposed the financial penalty on the MLRO for failing to ensure that the AML systems and controls were adequate.
Money laundering reporting officers can pay a high price for failure but anti-money laundering systems and financial crime prevention is essential to market confidence and consumer protection.
Philip Ryley is head of financial services and markets at Michelmores LLP