Release Date: 6th June 2018

To access the original FCA document, click here.

Summary

The Financial Conduct Authority (FCA) has fined Canara Bank £896,100 and imposed a restriction preventing it from accepting deposits from new customers for 147 days. This penalty is due to Canara Bank’s significant failings in maintaining adequate anti-money laundering (AML) systems and controls between 26 November 2012 and 29 January 2016. Despite being notified of these deficiencies, the bank did not take sufficient steps to address them.

Mark Steward, Executive Director of Enforcement and Market Oversight at the FCA, emphasised the seriousness of Canara Bank’s failure to improve its money laundering controls after being warned. The FCA’s Final Notice highlights that branches of overseas banks must fully understand their regulatory responsibilities and allocate appropriate resources to meet these obligations.

The FCA found that Canara Bank’s AML system failures were widespread and impacted almost every aspect of its business, including senior management, governance, oversight, lines of defence, money laundering reporting function, and AML systems and controls. These shortcomings breached Principle 3 of the FCA’s Principles for Businesses, which mandates firms to organise their affairs responsibly and effectively with adequate risk management systems.

Canara Bank agreed to resolve the case early, qualifying for a 30% discount on the fine. The FCA acknowledged that Canara Bank’s senior management cooperated fully with the investigation and that the bank has since rectified its substantive AML deficiencies.

Key Takeaways for Other Firms:

• Robust AML Systems: Ensure that AML systems and controls are robust and can effectively manage the risk of money laundering and financial crime.
• Prompt Remediation: Address identified weaknesses in AML systems immediately and thoroughly.
• Regulatory Understanding: Branches of overseas banks and their senior management must fully understand and comply with regulatory responsibilities.
• Resource Allocation: Allocate sufficient resources to ensure compliance with AML regulations and principles.
• Cooperation with Regulators: Cooperate fully with regulatory investigations and take proactive steps to rectify deficiencies.

In conclusion, the FCA’s fine and restriction on Canara Bank underscore the critical importance of maintaining effective AML systems. Firms must ensure robust controls, promptly address deficiencies, and fully understand their regulatory obligations to avoid severe penalties and protect the integrity of the financial system.