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.