The UK Financial Conduct Authority (FCA) has fined EFG Private Bank £4.2m ($6.4m) for serious shortcomings in its anti-money laundering (AML) controls for high risk customers, the first fine handed out by the new regulator.
The FCA said EFG failings lasted for more than three years, between December 2007 and January 2011. It is first time the bank has faced disciplinary proceedings.
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The investigation by the FCA’s predecessor, the Financial Services Authority (FSA), found that EFG had not fully put its AML policies into practice.
12% of EFG accounts judged ‘higher risk’
At the end of 2011 around 400 of EFG’s 3,342 customer accounts were deemed by the firm to present a higher risk of money laundering or reputational risk, and of these 94 were held by politically exposed persons (PEPs).
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By GlobalDataSpecifically, 17 of 36 of the reviewed customer files contained customer due diligence that highlighted significant money laundering risks.
Tracey McDermott, head of enforcement and financial crime, said:
"Banks are the first line of defense to make sure that proceeds of crime do not find their way into the UK. In this case while EFG’s policies looked good on paper, in practice it manifestly failed to ensure that it was addressing its AML risks. Its poor implementation of its agreed policies risked the bank handling the proceeds of crime. These failures merited a strong penalty from the FCA," she said.
"Firms that accept business from high risk customers must have systems, controls and practices to manage that risk. The FCA will continue to focus on high risk customers and business".
EFG Private Bank said it was disappointed at the failings, even though it has found no evidence that money laundering actually took place.
The bank said the fine will not impact reported profit this year as it was fully provided for in the 2012 results.
Failure to perform background checks
While examining one account, EFG’s due diligence unit noticed that a prospective client had acquired their wealth through their father, about whom there were allegations of links with organised crime, money-laundering and murder. This time again, there was insufficient information on file that indicated how the bank had acted towards the possible risks and whether it was acceptable or not.
EFG settled at an early stage of the investigation and qualified for a 30% discount on its fine. Without the discount the fine would have been £6m.
"The FCA seems to show no change in approach from its predecessor, the FSA, in enforcing a tough stance on anti-money laundering," said Jeremy Hill, a London based partner at law firm Debevoise & Plimpton LLP.
