You have been warned

Re-reading the FCA Decision Notice on Standard Bank over the weekend (oh yes, it’s a giddy life for me; wall-to-wall hedonism), one thing really caught my eye.  It’s in the bit on the new method of calculating the financial penalty (as outlined in my last post) – specifically the aggravations and mitigations.  And most specifically this: “The Authority considers that the following factor aggravates the failings: (1) The Authority has previously brought action against a number of firms for AML deficiencies and has stressed to the industry the importance of compliance with AML requirements.”

This sort of comment has been made before.  For instance, in the FCA’s Decision Notice on Guaranty Trust Bank (UK) Limited in August 2013, the FCA made this observation: “GTBUK’s failings merit the imposition of a financial penalty. The FCA considers the failings to be serious because… [they] occurred in a period during which the Authority brought and published other Enforcement cases against a number of institutions for shortcomings in their financial crime systems and controls.  As such, the Firm ought to have been aware of the importance of systems and controls to prevent and detect all types of financial crime, including money-laundering.”  But – luckily for Guaranty Trust – this was before the new calculation regime, and so it was more of an observation than anything else.

Not so for Standard Bank.  The fact that the FCA was able to say “we’ve done this before, with other institutions, and published our findings – you have been warned” cost the bank an additional 5% on their penalty – or £376,901.  In other words, Standard Bank has been given a heavier punishment not because of what they did, but because others had already done it and been caught.  It’s hard to think of a better way to make the case for learning from the mistakes of others.  MLROs, download those Decision Notices pronto, and get training.  Compared with £376,901, that training budget suddenly looks a real bargain!

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2 Responses to You have been warned

  1. Nikki Neal says:

    I’ve been thinking about this one and STILL find it hard to understand what the FCA is getting all excited about.

    I can see a lot of stuff written in the FCE Decision Notice about a set of rules being broken. disappointingly, however, I can’t see anything juicy at all about any consequences of these breeches.

    now if the review work of the FCA had led to any money-laundering action being stopped in its tracks, I’d be thinking to myself “ooohhh, and if only they’d had all these nice controls in place, then they wouldn’t be wading thigh-deep in dirty money today, would they?”. except, er, somehow irrespective of what Standard Bank WEREN’T doing, the stuff they WERE doing seemed to have kept the dirty money out anyway.

    so maybe their existing controls were fit for purpose after all?

  2. Dear Nikki
    As I understand it, it is not the role of the FCA to prosecute under the Proceeds of Crime Act; their remit is to assess compliance with the Money Laundering Regulations. I do not know – and I am sure they would not say – whether they have referred any individuals from Standard Bank to the law enforcement agencies (primarily NCA) for investigation for money laundering. If they have, a criminal prosecution will take much longer than a regulatory investigation, with the rules around evidence being so stringent. So we won’t hear about that for years – which will be the point at which we will know whether the failings were simply reckless, or whether they had concrete consequences.
    Best wishes from Susan

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