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Reflection: on the NatWest Fine

Thursday 20 October 2022

Earlier this month the International Federation of Compliance Professionals (IFCA)  Conference looked at the perennial challenge of compliance in a time of global complexity.

In a podcast published the UK’s Financial Conduct Authority (FCA) recently is a reminder mention of NAT West is reminder of the perennial challenge of the getting financial crime compliance right in their organisation. 

Executive Director of Enforcement and Market Oversight Mark Steward said in an official statement on the Nat West fine, “Anti-money laundering controls are a vital part of the fight against serious crime, like drug trafficking, and such failures are intolerable ones that let down the whole community, which, in this case, justified the FCA’s first criminal prosecution under the Money Laundering Regulations.”

The UK regulator began proceedings against the bank last March, which  resulted in the first the corporate prosecution under the MLR2007 which was established in the 2007 for the banking a firm suspected of money laundering. 

About ten months ago NatWest was fined over £ 264 million (about AUD $477 million ) for failures in financial crimes monitoring.

The FCA said in an official statement, “The charges covered NatWest’s failure to properly monitor the activity of a commercial customer, Fowler Oldfield, a jewellery business based in Bradford, between 8 November 2012 to 23 June 2016. When taking on the customer, NatWest initially understood it would not handle cash from the Fowler Oldfield business.

 However, over the course of the customer relationship approximately £365m [AUD $ 658 million] was deposited with the bank, of which around £264million[about AUD $476 million] was in cash.”

Though transactions had been flagged NatWest did act on the ‘red flags’. 

Areas of the Money Laundering  Regulation 2007 (MLR2007) that the British bank failed to comply with:

  • 8(1): A relevant person must conduct ongoing monitoring of a business relationship.
  • 8(3) Regulation 7(3) applies to the duty to conduct ongoing monitoring under paragraph (1) as it applies to customer due diligence measures.
  • 7(3) A relevant person must—
(a)determine the extent of customer due diligence measures on a risk-sensitive basis depending on the type of customer, business relationship, product or transaction; and
(b)be able to demonstrate to his supervisory authority that the extent of the measures is appropriate in view of the risks of money laundering and terrorist financing.
  • 14(1) A relevant person must apply on a risk-sensitive basis enhanced customer due diligence measures and enhanced ongoing monitoring—
(a)in accordance with paragraphs (2) to (4);
(b)in any other situation which by its nature can present a higher risk of money laundering or terrorist financing.

 The Dark Money Files has a down multi-episode  deep dive into the NatWest Fine and the ‘Bradford Laundromat’