Release Date: 12th October 2022
To access the original FCA document, click here.
Summary
Gatehouse Bank plc has been fined £1,584,100 by the Financial Conduct Authority (FCA) for serious deficiencies in its anti-money laundering (AML) controls between 9 June 2014 and 5 July 2017. This penalty was reduced from £2,263,084 due to a 30% discount for early settlement. Gatehouse, a Shariah-compliant bank primarily focused on real estate services, faced shortcomings in verifying customer identities, conducting enhanced due diligence, monitoring customer relationships, and maintaining internal controls.
Key Takeaways for Other Firms:
- Robust AML Policies and Procedures:
- Ensure comprehensive customer due diligence, particularly verifying identities and scrutinising sources of wealth and funds.
- Enhanced Due Diligence:
- Implement enhanced checks for high-risk customers, especially those from high-risk jurisdictions or politically exposed persons.
- Ongoing Monitoring:
- Continuously update and review customer information to reflect current financial crime risks.
- Effective Internal Controls:
- Maintain a well-resourced compliance function and ensure the effectiveness of a three lines of defence model.
Summary of Findings:
- Customer Due Diligence Failures:
- Gatehouse failed to adequately verify the identities and beneficial interests of its customers and did not properly scrutinise their sources of wealth and funds.
- Enhanced Due Diligence Shortcomings:
- The bank did not conduct sufficient enhanced due diligence for high-risk customers, including those domiciled in high-risk jurisdictions or politically exposed persons.
- Inadequate Ongoing Monitoring:
- Gatehouse did not ensure that customer information remained up-to-date, leading to deficiencies in monitoring the financial crime risks of its customers.
- Internal Control Failures:
- The compliance function was under-resourced, and the three lines of defence model did not operate effectively. Front-line managers failed to appropriately screen customers, placing undue burden on the Compliance function to rectify deficiencies.
Specific Example:
Gatehouse opened an account for a Kuwaiti company (Company A) to pool funds for real estate investments. The bank relied on Company A for customer due diligence without adequately verifying the quality of these checks. Consequently, Gatehouse accepted $62 million without properly vetting the funds for money laundering risks.
Remedial Actions:
Gatehouse has since taken significant steps to address these deficiencies. Between June 2014 and August 2016, the bank undertook a compliance review to remediate customer files and invested in improving its AML systems and controls. This included engaging external consultants and implementing a new suite of AML and financial crime policies and procedures.
Conclusion:
Gatehouse Bank plc’s significant failings in AML controls have led to substantial fines and highlight the importance of robust AML practices. Other firms should ensure comprehensive due diligence, effective enhanced checks, continuous monitoring, and well-resourced internal controls to avoid similar penalties and protect the integrity of the financial system.
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