FCA fines Sonali Bank UK £3.25m over anti-money laundering failure

The Financial Conduct Authority (FCA) has levied penalties on Sonali Bank (UK) Ltd (SBUK) and its former money laundering reporting officer for serious anti-money laundering (AML) systems failings, with the bank required to pay a £3.25m fine and prevented from accepting deposits from new customers for 168 days

Steven Smith, the bank’s former money laundering reporting officer (MLRO), has been fined £17,900 and prohibited from performing the MLRO or compliance oversight functions at regulated firms. The FCA judged he demonstrated’ a serious lack of competence and capability’.

 Despite having previously received clear warnings about serious weaknesses in its AML controls, SBUK failed to maintain adequate AML systems between 20 August 2010 and 21 July 2014, the regulator said.

The FCA found serious and systemic weaknesses affected almost all levels of its AML control and governance structure, including its senior management team, its money laundering reporting function, the oversight of its branches and its AML policies and procedures. This meant that the firm failed to comply with its operational obligations in respect of customer due diligence, the identification and treatment of politically exposed persons, transaction and customer monitoring and making suspicious activity reports.

As a result, SBUK breached principle 3 (taking reasonable steps to organise its affairs responsibly and effectively, with adequate risk management systems) of the FCA’s principles for businesses.

While under FCA investigation, SBUK breached principle 11 (dealing with regulators in an open and cooperative way) by failing to notify the FCA of an allegation of significant fraud

Smith was SBUK’s MLRO and compliance officer from February 2011. The investigation found that despite repeated warnings from the bank’s internal auditors, he   failed to put in place appropriate AML monitoring arrangements and failed to identify serious weaknesses in operational controls and a lack of appropriate knowledge among staff members.

In addition, Smith reassured SBUK’s board and senior management that controls were working well when they were not; and failed to report appropriately SBUK’s internal auditors’ concerns and the results of internal testing. He also did not impress upon senior management the need for more resources in the MLRO function and failed to take adequate steps to recruit more staff in a timely fashion.

The FCA said took into account the fact that Smith did not have sufficient senior management support and was overworked. However, the regulator found that he had failed to exercise due skill, care and diligence in managing the business of the firm for which he was responsible, and that he was knowingly concerned in aspects of SBUK’s breach of principle 3.

Both SBUK and Mr Smith agreed to settle at an early stage and therefore qualified for a 30% discount on their fines.

Mark Steward, director of enforcement and market oversight at the FCA, said: ‘Fighting money laundering is an issue of extreme international importance and ensuring that AML controls are effective and viewed as important throughout the business are fundamental obligations of all regulated firms.

‘There is an abundance of guidance for firms on how to comply with AML and financial crime requirements and no excuse for failing to follow it. The FCA will not hesitate to take action against firms and senior individuals who fall short of our standards. As in this case, such action may include using our powers to restrict a firm’s continuing business.’

The final notice for SBUK is here.

The final notice for Steven Smith is here.

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