Compliance teams won’t need to settle down to a scary movie this year as the Financial Conduct Authority (FCA) has ensured that there are enough real-life scares with its recent criminal prosecution. The mummy has risen after years of slumber!
While the Money Laundering Regulations 2007 (MLR) have been in place for some time, giving the FCA powers to pursue criminal prosecutions, NatWest has succumbed as the first victim of the FCA’s recent push to take a stronger approach to supervision and intervention.
On 16 March 2021, the FCA announced that it had begun criminal proceedings against NatWest for failures to adhere to the requirements of regulations 8(1) (A relevant person must conduct ongoing monitoring of a business relationship); 8(3) (it applied to the duty to conduct ongoing monitoring as it applies to customer due diligence measures); and (14)1 (a relevant person must apply on a risk-sensitive basis enhanced customer due diligence measures and enhanced ongoing monitoring in certain circumstances).
The proceedings were brought under regulation 45 MLR which requires certain firms to maintain adequate and effective anti-money laundering systems and controls. The case arose from the handling of funds that were deposited by a UK company where, of the £365 million paid into the customer’s account, around £264 million was paid in cash. The FCA alleged that “NatWest’s systems and controls failed to adequately monitor and scrutinise this activity”. On this occasion, the decision was made by the FCA not to pursue individuals at NatWest.
At the hearing on 7 October 2021, NatWest entered guilty pleas to the charges placed before it, confirming that it deeply regretted failing to “adequately monitor and therefore prevent money laundering by one of [its] customers between 2012 and 2016”. The matter has been referred for sentencing at Southwark Crown Court later this year when the bank faces an unlimited fine.
This case has brought to the forefront the real risks for firms in having insufficient anti-money laundering systems and controls in place. The FCA has been ramping up its anti-money laundering supervision in recent months, extending the requirement for companies to submit a financial crime log to the watchdog and also pulling in cryptocurrency firms. The FCA has warned that it will not be afraid to use its MLR criminal prosecution powers in cases of financial crime or money laundering from now on.
To avoid any future scares, it is key that firms keep their anti-money laundering systems and controls (including any internal training) under regular review to ensure compliance with their obligations under the various money laundering regulations. As it is clear that the FCA intends to focus on this area and is intent on showing that it is not afraid to bare its teeth, ensuring compliance should be a top priority for companies.
If any areas of concern are identified, then these should be addressed as a matter of urgency. If it appears that you may be, or indeed are, facing a criminal or civil action by the FCA, seek legal advice as a matter of urgency. Penningtons Manches Cooper is happy to assist.
It looks like this mummy is on the loose for the foreseeable future – companies beware.