Guaranty Trust Bank

Release Date: 8th August 2013

To access the original FCA document, click here.

Summary

Guaranty Trust Bank (UK) Limited (GTBUK) was fined £525,000 by the Financial Conduct Authority (FCA) for failing to establish and maintain effective anti-money laundering (AML) controls, particularly for higher-risk customers, including politically exposed persons (PEPs), during the period from 19 May 2008 to 19 July 2010. Initially, the fine was set at £750,000, but GTBUK received a 30% reduction for agreeing to settle early in the investigation.

The FCA’s action was driven by GTBUK’s inadequate systems to manage the risks associated with money laundering and terrorist financing. GTBUK, during its formative years in the UK, rapidly expanded its customer base, including individuals from high-risk jurisdictions, without implementing robust AML measures. This oversight was particularly critical given that these operations began soon after GTBUK became regulated, highlighting the necessity of compliance from the outset.

The key issues identified included a failure to:

1. Implement adequate systems to identify, assess, and manage potential money laundering risks.
2. Perform sufficient customer due diligence and enhanced due diligence for high-risk customers.
3. Maintained ongoing monitoring to ensure customer information and risk assessments were current and reflective of expected account activities.

Additionally, GTBUK was found deficient in several areas, including not screening prospective customers against sanction lists and PEP databases before establishing business relationships, and failing to secure senior management approval for initiating relationships with PEPs.

From this enforcement action, other firms can draw critical lessons:

1. Early Compliance: New and expanding firms must implement effective AML systems from the start, especially when entering high-risk markets.
2. Risk Management: Rigorous processes must be in place to identify, assess, and manage money laundering risks, with particular attention to high-risk customers.
3. Customer Due Diligence: Firms should conduct thorough due diligence before establishing relationships, ensuring documentation of the customer’s source of wealth and ongoing transactions.
4. Continuous Monitoring: Regular and enhanced monitoring of customer activities is essential to detect and prevent potential money laundering activities.
5. Training and Awareness: Ensuring that all relevant staff are trained and aware of AML regulations and procedures is critical for compliance and operational integrity.

This case underlines the importance of robust financial crime oversight within financial institutions, emphasising that compliance is not just a regulatory requirement but a fundamental component of operational risk management.

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