There is an abundance of guidance for firms on how to meet requirements relating to anti-money laundering and financial crime. Ignore it at your peril, warns Gowling WLG’s Greg Standing


Financial services firms are obliged by money laundering regulations and by the Financial Conduct Authority’s (FCA) rules to put in place policies and procedures to prevent and detect money laundering, to reduce the risk of financial crime which would undermine the UK financial services sector.

Ensuring that anti-money laundering (AML) controls are effective and viewed as important throughout the business is a fundamental obligation of all regulated firms and must be taken seriously. Where the FCA identifies serious failings it can and will impose substantial fines on a firm and its money laundering reporting officer (MLRO).

The FCA recently issued a Final Notice and imposed fines on Sonali Bank (UK) Ltd (SBUK) and its former MLRO, Mr Smith, of £3,250,000 and £17,900 respectively. It also imposed restrictions on SBUK prohibiting it from accepting deposits from new customers for 168 days. The fines and restrictions followed what the FCA found to be serious weaknesses and failings in SBUK’s AML controls between 2012 and 2014.

The FCA found serious and systemic weaknesses affecting almost all levels of SBUK’s AML control and governance structure, including in its senior management, its money laundering reporting function, the oversight of branches, and its AML policies and procedures. SBUK failed to comply with 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 steps to organise its affairs responsibly and effectively, with adequate risk management systems) of the FCA’s Principles of Business. While under investigation by the FCA, SBUK also failed to notify a potentially significant fraud that occurred, thereby also breaching Principle 11 (dealing with regulators in an open and cooperative way).

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The FCA found that, despite warnings from SBUK’s internal auditors, Smith failed to put in place appropriate AML monitoring systems, failed to identify serious weaknesses in operational controls and lack of appropriate knowledge among staff members, failed to report the internal auditor’s concerns and failed to impress upon senior management the need for additional resource in the MLRO function. He also failed to take up confidential reporting opportunities to raise concerns.

Smith was held to be in breach of Principle 6 (due skill, care and diligence in managing the business) of the FCA’s Statements of Principle for Approved Persons.

He was also found to be knowingly concerned in SBUK’s breach of Principle 3. He is now prohibited from performing money laundering or compliance oversight functions at regulated firms.

The FCA decided that the restriction on SBUK’s ability to accept deposits would be a more effective deterrent than the fine alone. It also sends a warning to others.

The FCA has made it clear it will take action against firms, and senior individuals, who fall short of its standards. You have been warned!