The Financial Conduct Authority has fined Standard Bank £7.6m for failings in its anti-money laundering controls with regards to corporate customers connected to “politically exposed” individuals.
Standard Bank, the UK subsidiary of South Africa’s largest banking group Standard Bank Group, failed to comply with money laundering regulations between 15 December 2007 and 20 July 2011.
According to the regulator the bank failed to sufficiently ensure all aspects of its AML policies were applied consistently to corporate customers who were connected to people with prominent public functions (known by the regulator as “politically exposed persons”).
Tracey McDermott, director of enforcement and financial crime at the FCA, said: “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.
“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 a sample of 48 files, the FCA found “serious weaknesses” in the bank’s anti-money laundering procedures, which were made even more serious considering they related to people in regions considered high-risk in terms of money laundering.
According to guidance issued by the Joint Money Laundering Steering Group, corporate customers known to be linked to PEPs, such as through a directorship or shareholding, are likely to put the customer into a higher risk category, and enhanced due diligence measures should therefore be applied.
This is the first fine issued by the FCA or its predecessor the Financial Services Authority in relation to AML failings with relation to commercial banking activity, and the first AML case to use the new penalty regime which applies to breaches committed from 6 March 2010 and which generally produces larger fines.
Standard Bank said in a statement that it “is pleased to bring this historical matter to a conclusion”, and added that “the FCA made no finding that the bank had ever handled the proceeds of crime”.
Standard Bank also pointed out that since 2010 it has implemented a remediation plan including refreshing all active client files, conducting a compliance and business review of all active customer relationships, increasing its AML resources and introducing an electronic system to ensure consistency of bank policies.
