The Financial Conduct Authority (FCA) has fined Santander UK £107.7m after it found "serious and persistent gaps" in its anti-money laundering (AML) controls, affecting business banking customers.
Between 31 December 2012 and 18 October 2017, Santander failed to properly oversee and manage its AML systems, which significantly impacted the account oversight of more than 560,000 business customers.
The regulator stated that the bank had ineffective systems to adequately verify the information provided by customers about the business they would be doing. It also failed to properly monitor the money customers had told them would be going through their accounts compared with what actually was being deposited.
Mark Steward, executive director of enforcement and market oversight at the FCA, said: “Santander’s poor management of their anti-money laundering systems and their inadequate attempts to address the problems created a prolonged and severe risk of money laundering and financial crime.
“As part of our commitment to prevent and reduce financial crime, we continue to take action against firms which fail to operate proper anti-money laundering controls.”
In one case, a new customer opened an account as a small translations business with expected monthly deposits of £5,000. Within six months it was receiving millions in deposits, and swiftly transferring the money to separate accounts.
Although the account was recommended for closure by the bank’s own AML team in March 2014, poor processes and structures meant that this was not acted upon until September 2015. As a result, the customer continued to receive and transfer millions of pounds through its account.
Santander agreed to a request from law enforcement to keep the account open in September 2015, however, it failed to keep track of this request and the account remained open until the FCA wrote to Santander in December 2016.
The FCA identified several other business banking accounts which Santander failed to manage correctly, leaving the bank open to serious money laundering risk. There were also examples of the bank failing to promptly deal with ‘red flags’ associated with suspicious activity, such as automated monitoring alerts.
These failures led to more than £298m passing through the bank before it closed the accounts.
Santander knew that there were significant weaknesses in its AML systems and controls and began a programme of improvements in 2013. While these changes resulted in some improvements, Santander concluded that the changes did not adequately address the underlying weaknesses and, in 2017, decided to implement a comprehensive restructuring of its processes and systems.
Santander UK stated that it continues to invest in its transformation and remediation programme.
The bank did not disputed the FCA’s findings and agreed to settle, which means it qualified for a 30% discount. Without the discount, the financial penalty would have been £153.9m.
As part of its role to protect consumers and the market, the FCA has repeatedly stepped in and penalised firms for poor management of their AML systems. In recent years it has fined Standard Chartered £102.2m, HSBC UK £63.9m, and its investigation led to NatWest being fined £264.8m.
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