NatWest hit with first criminal charge pursued by FCA

National Westminster Bank (NatWest) has been fined £264m for three accounts of money laundering failures.

The bank pleaded guilty at Westminster Magistrates Court on 7 October for its failures.

This marks the first time the Financial Conduct Authority (FCA) has pursued criminal charges for money laundering failings.

At the court, the sentencing judge Mrs Justice Cockerill said, “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.”

The charges included NatWest’s. failure to properly monitor the activity of a commercial customer, Fowler Oldfield, a jewellery business based in Bradford, between 8 November 2012 to 23 June 2016. When the customer was first onboarded, NatWest initially understood it would not handle cash from the Fowler Oldfield business, it said. However, the customer deposited around £365m into the bank during the lifecycle of the customer relationship, of this, £264m was in cash.

The FCA continued to state that some of the bank’s employees responsible for handling these cash deposits reported their suspicions to bank staff responsible for investigating money laundering, however, no appropriate action was taken.

Some of the red flags reported include significant amounts of Scottish bank notes deposited throughout England, deposits of notes carrying a prominent musty smell, and individuals acting suspiciously when depositing cash in NatWest branches.

FCA executive director of enforcement and market oversight Mark Steward 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.”

RegTech companies have stressed the importance of technology to help combat money laundering and ensure incidents like this do not happen again.

PassFort CEO Donald Gillies said, “It’s honestly astounding that the systems and controls an organisation like NatWest has in place did not raise serious and immediate questions over the alleged criminal activity taking place. This fine, the first of its kind in the UK, is likely to be very damaging to NatWest. Research has shown that customers who have a good compliance experience with a bank are much more likely to recommend it and return for repeat business.

“Compliance is critical in our financial infrastructure exactly because of risks posed by criminals. From customer onboarding, business or individual, to daily activity monitoring, banks are required to scrutinise every aspect to ensure it is legitimate. With increasing regulation coming into play it’s crucial that banks can rely on their systems to automate processes, without the worry that anything can slip through the net.”

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