FCA imposes penalties on Sonali Bank (UK) Ltd and its former money laundering reporting officer

The Financial Conduct Authority (FCA) has fined Sonali Bank (UK) Limited (SBUK) £3,250,600 and has imposed a restriction, preventing it from accepting deposits from new customers for 168 days. It has also fined the bank’s former money laundering reporting officer (MLRO), Steven Smith, £17,900 and prohibited him from performing the MLRO or compliance oversight functions at regulated firms.

Financial services firms are at risk from those seeking to launder money. As a result, they are required to maintain robust and risk-focused anti-money laundering (AML) systems. The FCA expects regulated firms to promote a culture which supports these controls and which impresses on all members of staff the importance of complying with them.

Mark Steward, Director of Enforcement and Market Oversight at the FCA, said:

Fighting money laundering is an issue of extreme international importance and ensuring that AML controls are effective and viewed as important throughout the business are fundamental obligations of all regulated firms.

There is an abundance of guidance for firms on how to comply with AML and financial crime requirements and no excuse for failing to follow it. The FCA will not hesitate to take action against firms and senior individuals who fall short of our standards. As in this case, such action may include using our powers to restrict a firm’s continuing business.”

Despite having previously received clear warnings about serious weaknesses in its AML controls, SBUK failed to maintain adequate AML systems between 20 August 2010 and 21 July 2014.

Mr Smith was SBUK’s MLRO and compliance officer from February 2011. He was responsible for overseeing the day-to-day operation of, and ensuring the effectiveness of, SBUK’s AML systems and controls. Despite repeated warnings from SBUK’s internal auditors, Mr Smith:

  • failed to put in place appropriate AML monitoring arrangements;
  • failed to identify serious weaknesses in operational controls and a lack of appropriate knowledge among staff members;
  • reassured SBUK’s board and senior management that controls were working well when they were not;
  • failed to report appropriately SBUK’s internal auditors’ concerns and the results of internal testing; and
  • failed to impress upon senior management the need for more resources in the MLRO function and failed to take adequate steps to recruit more staff in a timely fashion.

The FCA found that Mr Smith failed to exercise due skill, care and diligence in managing the business of the firm for which he was responsible, and that he was knowingly concerned in aspects of SBUK’s breach of Principle 3. The FCA considers that Mr Smith demonstrated a serious lack of competence and capability and as a result, has prohibited him from performing the money laundering reporting or compliance oversight functions at regulated firms.

Both SBUK and Mr Smith agreed to settle at an early stage and therefore qualified for a 30% (stage 1) discount.

For the full FCA announcement, click here.

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