Release Date: 9th April 2019
To access the original FCA document, click here.
Summary
The Financial Conduct Authority (FCA) has fined Standard Chartered Bank (Standard Chartered) £102,163,200 for significant Anti-Money Laundering (AML) control failures in its UK Wholesale Bank Correspondent Banking business and its branches in the United Arab Emirates (UAE). This is the second largest fine for AML control failings ever imposed by the FCA.
The FCA identified serious deficiencies in Standard Chartered’s customer due diligence and ongoing monitoring processes. These deficiencies included the bank’s failure to establish risk-sensitive policies, maintain adequate AML controls, and ensure its UAE branches applied UK-equivalent AML and counter-terrorist financing measures. The shortcomings exposed the bank to potential breaches of financial sanctions and increased the risk of money laundering.
Examples of these failings included:
- Opening an account with 3 million UAE Dirham (over £500,000) in cash without adequately investigating the source of the funds.
- Failing to collect sufficient information on a customer exporting a product with potential military applications to conflict zones.
- Ignoring repeated red flags about a customer linked to a sanctioned entity.
These violations occurred between November 2010 and July 2013 in the UK and from November 2009 to December 2014 in the UAE.
Mark Steward, FCA Director of Enforcement and Market Oversight, emphasised the severity of these breaches, noting they happened amid heightened global awareness and regulatory focus on AML risks. He acknowledged Standard Chartered’s ongoing efforts to improve its AML controls and its cooperation with the investigation, which resulted in a reduced penalty from £145,947,500 to £102,163,200 due to a 30% discount for early settlement.
Key Takeaways for Other Firms:
- Establish and Maintain Risk-Sensitive Policies: Implement robust AML and counter-terrorist financing controls.
- Ensure Compliance Across Branches: Apply consistent AML standards across all branches and subsidiaries, especially in higher-risk regions.
- Conduct Thorough Customer Due Diligence: Investigate the source of funds and monitor transactions for red flags.
- Respond to Regulatory Focus: Address regulatory findings promptly and comprehensively to avoid severe penalties.
In conclusion, Standard Chartered’s significant fine underscores the necessity for stringent and effective AML controls. Financial institutions must prioritise robust policies, thorough due diligence, and consistent application of AML standards across all operations to mitigate risks and ensure regulatory compliance.
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