Coutts & Co., a private bank owned by Royal Bank of Scotland Plc, was fined 8.75 million pounds ($13.9 million) by the U.K. financial watchdog for failing to put in place effective money-laundering controls.
The bank’s conduct “fell well below the standards we expect and the size of the financial penalty demonstrates how seriously we view its failures,” Tracey McDermott, the Financial Services Authority’s acting director of enforcement and financial crime, said in a statement today.
Coutts was fined 6.3 million pounds by the FSA in November for not warning clients about the risks of investing in a bond fund overseen by American International Group Inc. RBS, meanwhile, was fined 5.6 million pounds in August for not screening its customers for terrorist financing.
“A lot of focus is going into compliance with anti-money laundering rules but often these are very significant clients and the questions you have to ask could put those relationships at risk,” Sara George, a financial regulation partner at Stephenson Harwood in London, said in a telephone interview.
The bank agreed to settle at an early stage, qualifying for a 30 percent discount, the FSA said.
“We remain committed to ensuring that our systems and controls are robust and counter the risk of financial crime,” Rory Tapner, chief executive officer at RBS’s wealth division, said in an e-mailed statement.
The FSA visited Coutts’s offices in October 2010 as part of a wider review of anti-money laundering measures. The bank was found to have inadequate controls in around three quarters of the “high risk customer files” reviewed by the supervisor.
The bank didn’t have controls in place to monitor relationships with high risk clients and failed to carry out due diligence research on prospective customers, the FSA said.
Coutts had around 600 to 1200 clients classified as high risk due to their country of origin being “known to have high levels of corruption,” the FSA said in its final report.
The lapses at the bank were “serious, systemic and were allowed to persist for almost three years,” the FSA said.
The failures “resulted in an unacceptable risk of Coutts handling the proceeds of crime,” the FSA said.
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