The Financial Conduct Authority (FCA) has fined Standard Bank £7.64m for failings relating to its anti-money laundering (AML) policies and to procedures with corporate customers who are connected to 'politically exposed persons'.
The FCA said that the bank had failed to ensure that all aspects of its AML policies were applied appropriately and consistently to its corporate customers connected to 'politically exposed persons' (PEP) between 15 December 2007 and 20 July 2011.
Standard Bank had business relationships with 5,339 corporate customers of which 282 were linked to one or more PEPs during the period.The FCA reviewed Standard Bank's policies and procedures and a sample of 48 corporate customer files, all of which had a connection with one or more PEPs.
The results of this review highlighted serious weaknesses in the application of Standard Bank's AML policies and procedures, the regulator said.
It found that the bank had not consistently carried out adequate enhanced due diligence measures before establishing business relationships with corporate customers that had connections with PEPs and had not conducted the appropriate level of ongoing monitoring for existing business relationships.
This is the first AML case the regulator has brought focused on commercial banking activity and under the new penalty regime, which applies to breaches committed from 6 March 2010, and imposes larger fines.
Enforcement and financial crime director Tracey McDermott 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."
The FCA said that commercial banking business can be used to launder money, particularly in the layering or integration stages of the money laundering process.
Therefore, in order to prevent financial crime, banks operating in this sector must have effective AML systems and controls in place ensuring that all the participants in commercial banking transactions are subjected to effective and appropriate due diligence.
This is particularly important where the transaction involves 'politically exposed persons' or other high risk customers.
Standard Bank is the UK subsidiary of Standard Bank Group, South Africa's largest banking group. The group is an international banking group with extensive operations in 18 African countries and operations in 13 other countries outside of Africa.
The bank responded to the FCA fine saying it waspleased to bring this historical matter to a conclusion".
Since 2010 the bank has "embarked on an extensive remediation plan", it said, including refreshing and reviewing all active client files and "significantly" increasing the resources of its anti-money laundering compliance function.
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