Natwest was fined £265m at a court hearing yesterday after it admitted it had failed to prevent money laundering.
In what marked the first time the Financial Conduct Authority (FCA) has pursued criminal charges for money laundering failings, the bank was convicted of three offences of failing to comply with money laundering regulations.
Natwest had failed to properly monitor the activity of a commercial customer, Fowler Oldfield, a jewellery business based in Bradford, between November 8, 2012 and June 23, 2016.
When taking on the customer, Natwest initially understood it would not handle cash from the Fowler Oldfield business.
However, over the course of the customer relationship, approximately £365m was deposited with the bank, of which £264m was in cash.
Some of the bank’s employees, who were responsible for handling these cash deposits, reported their suspicions to bank staff responsible for investigating suspected money laundering, yet no appropriate action was taken.
The ‘red flags’ that were reported included significant amounts of Scottish bank notes deposited throughout England, deposits of notes carrying a "musty smell", and individuals acting suspiciously when depositing cash in Natwest branches.
Additionally, the bank’s automated transaction monitoring system incorrectly recognised some cash deposits as cheque deposits.
As cheques carry a lower money laundering risk than cash, this was a significant gap in the bank’s monitoring of a large number of customers depositing cash, the FCA said.
Justice Cockerill, the sentencing judge at Southwark Crown Court, said yesterday (December 13): "….it must be borne in mind that although in no way complicit in the money laundering which took place, the bank was functionally vital. Without the bank – and without the bank’s failures - the money could not be effectively laundered."
At a hearing in October at Westminster Magistrates’ Court, the bank pleaded guilty to failing to prevent a £365m alleged money laundering scheme that involved cash being carried out in black bin liners.
Natwest accepted it had failed to comply with the Money Laundering Regulations 2007 and this was the first criminal prosecution under the Money Laundering Regulations 2007 brought by the Financial Conduct Authority.
A separate investigation by West Yorkshire Police has led to 11 people pleading guilty to charges relating to the cash deposits and three cash couriers being charged.
A further 13 individuals are awaiting trial at Leeds Crown Court on April 25, 2022 in relation to the activities of Fowler Oldfield.
Mark Steward, executive director of enforcement and market oversight at the FCA, said: “Natwest is responsible for a catalogue of failures in the way it monitored and scrutinised transactions that were self-evidently suspicious.
“Combined with serious systems failures, like the treatment of cash deposits as cheques, these failures created an open door for money laundering.
“Anti-money laundering controls are a vital part of the fight against serious crime, like drug trafficking, and such failures are intolerable ones that let down the whole community, which, in this case, justified the FCA’s first criminal prosecution under the Money Laundering Regulations.”
Nick Barnard, senior associate at Corker Binning, said the fine would serve as a benchmark for future anti-money laundering prosecutions against similar large financial institutions.
The fine to pay by Natwest reflected a discount for the guilty plea and would have otherwise been £397m.
“The magnitude of the penalty is comparable to those seen in some Deferred Prosecution Agreements as agreed by the Serious Fraud Office in cases of serious fraud and corruption, and so will be seen as a major achievement for the Financial Conduct Authority in its role as a prosecutor,” he said.
sonia.rach@ft.com
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