Last week it was found that NatWest is facing the possibility of a fine of up to £320m following the bank’s admission of money laundering. The banking giant admitted it had failed to properly monitor £365m when it was deposited into a customer’s account.
It is the first time a financial institution has faced criminal prosecution under anti-money laundering laws in the UK. The Financial Conduct Authority (FCA) said NatWest, which is 55% taxpayer-owned after a more than £45bn state bailout during the financial crisis, failed to adhere to the requirements of anti-money laundering legislation concerning Fowler Oldfield’s account between 7 November 2013 and 23 June 2016.
The situation has sent echoed concerns throughout the City and Canary Wharf as many financial institutions and organisations are beginning to realise the FCA may be alert to any engagements they may have with similar circumstances. The FCA said NatWest failed to adhere to the requirements of anti-money laundering legislation about Fowler Oldfield’s account between November 2013 and June 2016. Fowler Oldfield was a century-old jeweller based in Bradford. It was shut down following a police raid in 2016.
FCA prosecutor Clare Montgomery QC told Westminster magistrates yesterday that when Fowler Oldfield was taken on as a client by NatWest, its predicted turnover was said to be £15m per annum. However, it deposited £365m over the space of almost five years. Natwest chief executive Alison Rose has apologised and expressed Natwest’s regret and their failure to adequately monitor and essentially prevent money laundering by one of their customers. On the potential record fine that NatWest is facing, prosecutor Montgomery said yesterday that “the appropriate harm figure is going to be around £170m, with a multiplier of 200 per cent.”
Chief magistrate Paul Goldspring said the figures involved were too large to be dealt with by the magistrate court, and sentencing will take place at Southwark Crown Court on or before 8 December. Fines handed out can vary and it is a decision for the judge at sentencing. They may include discounts for guilty pleas, which start at 33 per cent depending on the stage in the process that the plea is entered.
Finally, Glenn Smith, EMEA head of AML and head of fraud at SAS, stressed the importance and role of fintech in detecting money laundering activities. With 40bn payments made in the UK in 2019, it is clear to Smith that manual, inexact, and time-consuming processes based on legacy rules-based transaction monitoring systems have no place in modern banking.
The Bank of England published a Financial Policy Summary and Record on the 8th October 2021. The increasing reliance by the financial system on critical third parties (CTPs), including cloud service providers, can bring benefits to the financial sector, including improved operational resilience. However, the increasing criticality of the services that CTPs provide, alongside concentration in a small number of providers, pose a threat to financial stability in the absence of greater direct regulatory oversight.
Regulated firms will continue to have primary responsibility for managing risks stemming from their outsourcing and third-party dependencies. However, additional policy measures, some requiring legislative change, are likely to be needed to mitigate the financial stability risks stemming from concentration in the provision of some third-party services.
With this revelation, it is clear that financial institutions need to monitor their money laundering systems in order to avoid criminal prosecution.