As you have doubtless seen, yesterday the Financial Crime Authority issued a penalty for AML failings against Standard Bank Plc. According to the press release (and surprisingly), “this is the first AML case the FCA, or its predecessor the Financial Services Authority (FSA), has brought focused on commercial banking activity”, and it has resulted in a financial penalty of £10,914,900. But what is interesting about this financial penalty is that it is the first levied under the new penalty regime, which applies to breaches committed from 6 March 2010 – and under which larger fines are anticipated.
The Final Decision gives the detail. The failings were deemed to have occurred in a relevant period stretching from 15 December 2007 [i.e. the date of implementation of the Money Laundering Regulations 2007] to 20 July 2011. For failings prior to 6 March 2010, the assessment of penalty was made under the old regime – taking in account the extent of the breaches, the size of the firm, its regulatory record and so on, and then sticking a finger in the air and coming up with £3 million.
For failings on and after 6 March 2010, the system is much more mathematical and is a five-step sum. Firstly there is the question of whether the firm concerned benefited financially by the failings; Standard Bank did not, so that’s a penalty of £0. Secondly we look at the seriousness of the failings; the FCA judged Standard Bank’s failings to be level 4 in seriousness, which equates to a penalty of 15% of the firm’s revenue for the relevant period, which works out at 15% of £50,253,520 – or £7,538,028. Thirdly we take into account any aggravating and/or mitigating factors: the FCA considered that the aggravation of the fact that other firms have been brought to brook for AML failings and the mitigation of the fact that Standard Bank co-operated with the investigation totted up to a net 5% extra penalty, taking the running total to £7,914,929. Fourthly, the FCA has the option to increase the penalty if it feels that it still represents an insufficient deterrence – such an increase was deemed unnecessary in this case. And fifthly, there is that 30% discount for early settlement, bringing the total penalty of £10,914,900 (that’s £3,000,000 plus £7,914,929, rounded to the nearest hundred – DO keep up) down to the headline figure of £7,640,400. You see: your teachers always told you that you’d need maths one day.