The UK subsidiary of South Africa’s largest bank group was fined £7.6 million by the Financial Conduct Authority for failings in its anti-money-laundering policies and procedures.
Between December 2007 and July 2011 Standard Bank plc failed to comply with Regulation (1) of the Money Laundering Regulations because it didn’t take reasonable care to ensure that all aspects of its AML policies were applied appropriately and consistently to its corporate customers connected to politically-exposed persons – a person in a high-profile public position appointed by a state or international body (or an immediate member of their family).
The FCA found that, during that period, Standard Bank had business relationships with 5,339 corporate customers, of which 282 (5.3%) were linked to one or more PEPs, such as through a directorship or shareholding. Enhanced due diligence (EDD) measures therefore ought to have been applied, the FCA concluded.
The regulator reviewed a sample of 48 files of corporate customers, all with linked to PEPs. It found what it described as “serious weaknesses” in the application of Standard Bank’s AML policies and procedures. The bank did not consistently:
- carry out adequate EDD measures before establishing business relationships with those corporate customers; and
- conduct the appropriate level of ongoing monitoring for existing business relationships by keeping customer due diligence up to date.
Clients from higher AML-risk jurisdictions
The FCA said the failings were particularly serious given that Standard Bank provided loans and other services to a significant number of corporate customers from jurisdictions that have been identified as posing a higher risk of money-laundering.
Tracey McDermott, director of enforcement and financial crime, said: “If [banks] accept business from high risk customers they must have effective systems, controls and practices in place to manage that risk. Standard Bank clearly failed in this respect.”
This is the first AML case brought under the new higher-penalty regime. Standard Bank’s fine would have been £10.9 million but was reduced by 30% because it settled at an early stage in the investigation process. The FCA added that Standard Bank “has taken significant steps at significant cost towards remediating the issues identified”.
The full text of the FCA's decision notice can be found by clicking here.