Release Date: 23rd January 2014
To access the original FCA document, click here.
Summary
The Financial Conduct Authority (FCA) has fined Standard Bank PLC, a UK subsidiary of South Africa’s largest banking group, Standard Bank Group, £7.6 million. This penalty was imposed due to significant failings in the bank’s anti-money laundering (AML) controls, specifically related to corporate customers linked to politically exposed persons (PEPs). This marks the first instance of the FCA, and its predecessor the Financial Services Authority (FSA), focusing an AML case on commercial banking and applying a new penalty regime designed for breaches post-March 2010, which anticipates larger fines.
Between December 2007 and July 2011, Standard Bank did not exercise due diligence as required under Regulation 20(1) of the Money Laundering Regulations. They failed to implement effective AML policies and were inconsistent in applying these policies, especially concerning corporate clients connected to PEPs. During this period, Standard Bank had business dealings with 5,339 corporate customers, 282 of whom were linked to PEPs. The review by the FCA of 48 customer files connected to PEPs revealed significant weaknesses in executing adequate Enhanced Due Diligence (EDD) and ongoing monitoring processes.
This lack of stringent AML measures placed Standard Bank at a heightened risk of being exploited for money laundering, especially since many of these customers were from or operated in higher-risk jurisdictions. Despite identifying these shortcomings early in the relevant period, the bank did not take sufficient steps to address the issues. This inaction led to serious compliance failures, undermining the integrity of the UK financial system—a primary objective of the FCA.
Standard Bank and its senior management cooperated with the FCA investigation and have implemented substantial remedial measures advised by external consultants. Due to their early settlement in the investigation process, they received a 30% reduction in the fine, which would otherwise have been £10.9 million.
This enforcement action serves as a critical reminder to other financial institutions of the importance of robust AML systems, particularly in dealing with high-risk customers like PEPs. The FCA has previously emphasised the necessity of compliance with AML standards through industry guidance and penalties. Institutions must ensure they carry out effective due diligence before establishing relationships and maintain rigorous ongoing monitoring to manage risks adequately.
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