By Kirstin Ridley
LONDON Jan 23 The UK division of South Africa's
Standard Bank Group has been fined 7.6 million pounds
($12.6 million) for lax anti-money laundering controls, the
first commercial bank penalised in Britain for such an offence.
Regulators worldwide are cracking down on money laundering
controls just over a year since HSBC paid a hefty $1.92
billion to settle U.S. charges that it allowed Mexican and
Colombian cartels to launder drugs proceeds - and lawyers said
they expected more penalties to follow.
Britain's Financial Conduct Authority (FCA) said Standard
Bank, part of South Africa's largest banking group, had failed
to check and monitor the relationships its corporate customers
had with people holding, or close to those holding, prominent
public positions - so-called PEPS (politically exposed people).
"If they (banks) accept business from high-risk customers
they must have effective systems, controls and practices in
place to manage that risk. Standard Bank clearly failed in this
respect," said Tracey McDermott, head of the FCA's enforcement
and financial crime division.
Raj Parker, a partner at law firm Freshfields, said
legislation was being reviewed and strengthened in Europe and in
"Anti-money laundering enforcement activity is
making headlines across the globe. I am sure there is more
enforcement to follow," he said.
The FCA reviewed 48 Standard Bank corporate customer files
between December 2007 and July 2011. It said all had connections
with PEPs and highlighted "serious weaknesses" in how the bank
applied its policies and procedures.
Regulators say that where corporate customers are known to
be linked to a PEP, for example through a directorship or
shareholding, banks need to increase due diligence because such
customers are likely to pose a higher risk of financial crime.
During the period Standard Bank had business relationships
with 5,339 corporate customers, of which 282 were linked to one
or more PEPs. However, it had consistently failed to carry out
adequate enhanced due diligence checks or conduct appropriate
levels of ongoing monitoring, the FCA said.
Standard Bank, which cooperated with the FCA during the
investigation, said measures introduced since 2010 included
refreshing all active client files, conducting a compliance and
business review and increasing resources to beef up its
anti-money laundering compliance controls.
It noted that the FCA had not suggested that the bank had
ever handled the proceeds of crime.