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 Asia.
"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.