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FSA fines Coutts £8.8m for anti-money laundering failures

The FSA has fined Coutts & Company £8.8m over anti-money laundering systems and controls failures.

The regulator says the failings related to high risk customers, were “serious and systemic”, and were allowed to persist for almost three years.

The FSA visited Coutts in October 2010 as part of its thematic review into banks’ management of high money-laundering risk situations. 

Following the visit, the FSA’s investigation found Coutts did not apply robust controls when starting relationships with high risk customers and did not consistently apply appropriate monitoring of those relationships. 

The FSA determined the anti-money laundering team at Coutts failed to provide an appropriate level of scrutiny and challenge.

The regulator identified deficiencies in nearly three quarters of the politically exposed persons and high risk customer files reviewed.

It found Coutts failed to gather sufficient information to establish the source of wealth and source of funds of its prospective PEP and other high risk customers, and failed to identify or assess adverse intelligence about prospective and existing high risk customers properly and take appropriate steps in relation to such intelligence.

Coutts also failed to keep the information held on its existing PEP and other high risk customers up-to-date, and scrutinise transactions made through PEP and other high risk customer accounts appropriately.

FSA acting director of enforcement and financial crime Tracey McDermott says: “Coutts’ failings were significant, widespread and unacceptable. Its conduct fell well below the standards we expect and the size of the financial penalty demonstrates how seriously we view its failures.”

Coutts is owned by Royal Bank of Scotland. RBS chief executive of the wealth division Rory Tapner says: “We are disappointed Coutts & Co did not meet the FSA’s standards with regard to establishing and maintaining effective anti-money laundering controls in relation to high risk clients.

“Since the FSA first raised its concerns, we have implemented a number of improvements to prevent any recurrence of these failings. We remain committed to ensuring our systems and controls are robust and counter the risk of financial crime in all the markets in which we operate.”

The FSA fined Coutts £6.3m in November over “serious failings” in the way Coutts sold the £1.4bn AIG enhanced variable fund.

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Comments

There are 8 comments at the moment, we would love to hear your opinion too.

  1. Coutts operated a poor compliance operation during the time of this investigation. There was a sense of ‘our clients know better and do not want to be bothered with all this admin stuff!’.

    Compared to contemporary organisations, Coutts were operating like a ‘club’ with outdated compliance practices. Coupled with a salesforce with large targets, and driven by a management structure that classified its clients as high net worth, very high net worth and super high net worth (with competing managers and little compliance liaison), this regulatory action is not surprising.

  2. Tip of the iceberg.

  3. nastiness abound 26th March 2012 at 12:56 pm

    time warp to here and now in a blink of an eye

  4. And do you see the FSA ordering the bank staff to complete a rake load of exams to pass before 2013 to stay in business ?

  5. This money laundering review took place in October 2010, 18 months ago.
    The FSA should be applauded for such prompt regulatory action. We have had a whole raft of regime changes and Civil Wars in the Middle East in that time.
    It’s no wonder that they never saw the financial crisis until it was almost over. Take 18 months over a RYL and watch the outcry – eventually!

  6. Andy Cunningham 28th March 2012 at 2:29 pm

    and your address please your majesty…… Buckingham Palace! Do you have a bill or bank statement with your name on? Oh and can I see your passport please?

  7. Narinder Aggarwal 31st March 2012 at 12:56 pm

    If it was small partnership firm or individual practice, they would not only be fined but their licenses revoked and the individuals / directors barred from practicing. Why when large scale institutional infringements occur only a slap on wrist and or fine only?? Carry on they are not the first or the last. Higher bonuses for the big guys for exceeding the targets. Everybody happy.

  8. Anti Money Laundering 1st August 2012 at 10:15 am

    likewise HSBC now its a time for another big brand Coutts & Company got fined by the FSA.its been a trend now not to follow any money laundering rules.ML gonna be a serious problem in future.

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