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Home > Regulation > UK Regulation

By Donia O'Loughlin | Published Aug 02, 2012

FSA fines Turkish Bank £294K for money laundering failings

The Financial Services Authority has fined Turkish Bank (UK) Ltd £294,000 for breaches of the money laundering regulations 2007 that led to “unacceptable risk” that the bank could have been used to launder money.

The news follows HSBC being rebuked by a US senate sub-committee last month over its own money laundering failings that allegedly led to it being used by terrorist groups. The bank apologised to the committee and chief compliance officer David Bagley stepped down from his position.

The regulator said the breaches at TBUK were widespread and lasted over two and a half years. This is the first occasion in which the FSA has taken enforcement action against a firm in relation to money laundering weaknesses in its correspondent banking arrangements.

A correspondent bank means that it provides banking services to an overseas bank to enable the respondent to provide its own customers with cross-border products and services, such as payment and clearing, that it cannot provide them with itself.

According to the FSA, the bank acted as a correspondent bank for nine respondent banks in Turkey and six respondent banks in Northern Cyprus between 15 December 2007 and 3 July 2010.

Under the regulations, providing correspondent banking services to banks based in non-EEA states is recognised as creating a high risk of money laundering that requires enhanced due diligence and ongoing monitoring of the relationship.

During this period, Turkey and Northern Cyprus did not have anti-money laundering requirements that were equivalent to those in the UK.

The FSA visited TBUK in July 2010 as part of a thematic review of how banks operating in the UK were managing money laundering risks. The regulator said the visit gave serious cause for concern in relation to TBUK’s AML controls over correspondent banking.

Whilst not deliberate or reckless, the FSA said the bank’s failings were more serious because the regulator had previously warned TBUK of deficiencies in its approach to AML controls over correspondent banking.

Tracey McDermott, acting director of the enforcement and financial crime division, said: “Turkish Bank fell far short of the standards we expect of firms in managing their money laundering risks. This was despite clear warnings from the FSA that it needed to improve.

“Banks must have appropriate policies and procedures in place to manage these risks. Turkish Bank’s correspondent banking business made it particularly vulnerable to money laundering risks and its failings exposed UK financial services to the possibility that money could be laundered through the UK.

“We will continue to demand the highest standards from banks and to take tough action for those banks that fail to meet them.”

TBUK agreed to settle with the FSA at an early stage of the investigation. Without this early settlement and the firm’s co-operation, the fine would have been £420,000.

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