In its largest-ever financial penalty levied for AML failings, the FSA has fined Coutts & Co £8,750,000 for AML failings. The full FSA notice is here, and it makes depressing reading – one might have hoped that the banker to the Queen would have been more aware of the concept of the PEP and the responsibilities of serving them. Back in October 2010, the FSA was doing a review into how banks were dealing with high-risk money laundering situations, and (to quote from the FSA notice) found that “Coutts did not apply robust controls when starting relationships with high risk customers and did not consistently apply appropriate monitoring of those high risk relationships”. Looking at the hard facts: “The FSA reviewed 103 high risk customer files, and identified deficiencies in 73 files (71%) as a result of the Firm’s failure to gather appropriate due diligence when accepting a new customer and/or the Firm’s failure to conduct appropriate ongoing monitoring of existing customers”. “Even more sadly, as you know how I love those who work in AML, “the AML team at Coutts failed to provide an appropriate level of scrutiny and challenge”.
One possible explanation is this: “Coutts was expanding its customer base during the Relevant Period and staff were incentivised in part to increase the number of customers taken on. As such, it was important that there were appropriate systems and controls in place, including with respect to the risk of money laundering.” A few years ago I thought about doing a PhD in criminology, and the subject I chose was the impact of the bonus culture on AML compliance. I didn’t do the PhD in the end, because I discovered that 103.5% of criminological research is statistical and mathematical and I’m no good at that, but I am still fascinated by the basic premise: how can we ask people whose take-home pay depends on bringing in business to turn away certain types of business – perhaps the most lucrative business they will ever be offered?