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Standard Bank hit by £7.6m FCA fine for failures in AML controls

The Financial Conduct Authority (FCA) has fined Standard Bank £7,640,400 for failings relating to its anti-money laundering (AML) policies and procedures over corporate customers, connected to politically exposed persons (PEPs).

During the assessed period from 15 December 2007 until 20 July 2011, Standard Bank failed to comply with Regulation 20(1) of the Money Laundering Regulations when it had business relationships with 5,339 corporate customers of which 282 were linked to one or more PEPs. Enhanced due diligence (EDD) measures should have been applied in these instances, but the UK regulator was not satisfied that appropriate AML controls were in place to ensure this. The FCA reviewed a sample of 48 corporate customer files from Standard Bank in reaching its conclusions and says it “highlighted serious weaknesses in the application of Standard Bank’s AML policies and procedures”, necessitating the fine.

The FCA found the bank guilty of “failing to take reasonable care to ensure that all aspects of its AML policies were applied appropriately and consistently to its corporate customers connected to PEPs”.

The £7.6m fine is the first AML case that the FCA, or its predecessor body the UK Financial Services Authority (FSA), has brought against commercial banking activity, although the US implemented heavy fines famously a couple of years ago when its regulatory authorities fined HSBC and Standard Chartered hundreds of millions of dollars for allegedly laundering Mexican drug money and banned Iranian trades.

The Standard Bank £7.6m FCA fine is the first AML case to use the new UK regulatory authority’s penalty regime, which applies to breaches committed from 6 March 2010 onwards. Under the new regime larger UK AML fines can be expected in the future. Many banks are consequently looking towards shared services such as SWIFT's sanctions screening and new Know Your Customer (KYC) platforms to 'tick the compliance box' for them at a lesser exspense than an in-house tech solution would cost.

Commenting on the UK regulatory action, Tracey McDermott, director of enforcement and financial crime, 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.”

Standard Bank is the UK subsidiary of Standard Bank Group, South Africa’s largest banking group, which has extensive operations in 18 African countries and in 13 other countries outside of Africa.