The FSA has fined Swiss bank Habib Bank AG Zurich £525,000 and its former money laundering reporting officer Syed Itrat Hussain £17,500 for failures in setting up adequate anti-money laundering systems and controls.
The regulator says the failings at Habib happened between December 2007 and November 2010, and exposed the firm to an “unacceptable risk” of money laundering.
Habib is a privately owned Swiss bank with 12 UK branches and approximately 15,500 customers. Just under half of its customers were based outside the UK and about half of its deposits came from jurisdictions which either had less stringent anti-money laundering requirements or were perceived to have higher levels of corruption than the UK.
The FSA says Habib failed to set up and maintain adequate controls for assessing the level of money laundering risk posed by its customers. Habib maintained a high risk country list but this excluded certain high risk countries on the basis that it had group offices in them.
The bank also failed to carry out appropriate due diligence on higher risk customers.
In two-thirds of the 68 customer files it reviewed, the FSA found instances where the account had been inappropriately classified as normal risk, insufficient information or supporting evidence had been gathered, and/or enhanced due diligence had not been carried out ahead of transactions on the account.
Hussain, who was responsible for the oversight of Habib’s anti-money laundering systems and controls, has now retired from the financial services industry.
FSA acting director of enforcement and financial crime Tracey McDermott says: “Habib’s failings were unacceptable. Habib’s belief that local knowledge of a country through a group office mitigated the higher money laundering risk posed by that country was entirely misconceived.
“It is critical that money laundering reporting officers properly evaluate, on an ongoing basis, the adequacy and effectiveness of the anti-money laundering systems and controls which they are responsible for. Where individuals fail to meet their regulatory responsibilities we will not hesitate to take action.”