Under the Money Laundering Regulations, institutions must have systems in place to stop suspected money laundering from their customers. On 13 December 2021, NatWest was fined £265 million after it pleaded guilty to three counts of failing to properly monitor £365 million deposited into the account of a Bradford jeweller, Fowler Oldfield. The Financial Conduct Authority (FCA) alleged that NatWest committed offences under the Money Laundering Regulations 2007 by failing to adequately monitor customer accounts between the period of 2011 to 2016.
The case in point
In our earlier article, we discussed the criminal proceedings brought by the FCA against NatWest for their handling of funds deposited by a UK incorporated customer into their NatWest account. On 7 October 2021, NatWest indicated guilty pleas at the Westminster Magistrates’ Court.
The FCA told the court that NatWest had predicted Fowler Oldfield’s annual revenue to be £15 million. During one period, Fowler Oldfield deposited up to £1.8 million a day despite NatWest agreeing it would not handle cash deposits from Fowler Oldfield. The FCA alleged that NatWest failed to properly scrutinise “increasingly large cash deposits”.
Up to £2 million in cash were transported by couriers to an industrial estate each day before being deposited into Fowler Oldfield’s NatWest account. Four of the couriers have been sentenced by Judge Colin Burn at Bradford Crown Court. Fowler Oldfield was liquidated following a police raid in 2016.
The FCA said it would not take action against any current or former employees and was not anticipating further investigations by authorities into this conduct.
On 13 December 2021, Southwark Crown Court fined NatWest £264,772,620 and ordered the institution to pay £4,297,466 in costs and a confiscation order of £460,047. At the sentencing hearing, the FCA noted that NatWest did not properly investigate numerous warnings generated by its system and a rule designed to flag suspicious activity was disabled after it created too many alerts. The National Crime Agency (NCA) had also raised concerns due to the high number of Scottish banknotes being deposited in England.
Mrs Justice Cockerill, the sentencing judge, stated “throughout the indictment period it is accepted NatWest sought to discharge its obligations under the regulations and that it failed to do so…Although in no way complicit in the money laundering which took place…without the bank’s failings the money could not have been laundered.” Mrs Justice Cockerill also stated that the fine would have been much higher had the bank not pleaded guilty.
NatWest’s chief executive Alison Rose stated, “we deeply regret that NatWest failed to adequately monitor and therefore prevent money laundering by one of our customers between 2012 and 2016…NatWest has a vital part to play in detecting and preventing financial crime and we take extremely seriously our responsibility to prevent money laundering by third parties…We work tirelessly with colleagues, other banks, industry bodies, law enforcement, regulators and governments to help find collaborative solutions to this shared challenge. These partnerships are crucial to counter the significant and evolving threat of financial crime to society.”
Mel Stride, the chairman of the Treasury committee has questioned the FCA on why it decided not to pursue any of NatWest’s individual bankers, and why it took so long to prosecute the bank.
This case is an example of the cost of compliance with Anti-Money Laundering Regulations and how getting it wrong has a price. Serious organised crime is a threat to all and creates financial and reputational risks even for the largest and well-established of institutions. There is a need to strike a balance between thorough and effective due diligence processes whilst minimising the disruption this can cause to an institution’s operation and the experience of its customers.
Having an understanding of the latest Anti-Money Laundering Regulations and putting the correct systems in place to mitigate these risks can breathe some reassurance to institutions wishing to remain fully compliant. With not only the FCA but other agencies such as the Serious Fraud Office (SFO) prone to investigating alleged money laundering offences (see for example the SFO’s investigation into Petrofac Limited) it remains ever more important that institutions understand and recognise criminal behaviour before they become liable for the wrongdoings of others.
Rosenblatt can help
Rosenblatt has a wealth of experience in financial crime and is uniquely placed to support clients’ that are the subject of an FCA investigation and prosecution having defended one of the largest prosecutions brought by the Financial Conduct Authority.
https://www.rosenblatt-law.co.uk/services/financial-crime/#financial-crime
Sources
NatWest faces £340m fine after admitting ‘money-laundering’ failings | NatWest Group | The Guardian
NatWest fined £265m after bin bags of cash laundered – BBC News
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