‘There is Nothing Permanent Except Change’ - Heraclitus

I’m going to say it….yes the C word. Christmas. Its nearly Christmas. With the festive season right around the corner, it is a good time for reflection. Reflection can mean many things, however, in our industry the most significant aspect to reflect on is expectation and obligations. As a firm, have we met them?

This year has been an unprecedented year for FCA fines- so far the regulator has handed out fines amounting to £391,773,187, the largest in its history[1]. Historically firms, especially those tier-one regulated financial institutions, have always walked along the regulatory white line. However; especially in the last year and more prevalent than ever, firms are aware of the muscle power of the regulator and are well-aware that they are not afraid to use it.

This week ANZ Bank revealed it was reviewing its anti-money laundering procedures amid the recent Westpac scandal in Australia. ANZ revealed that in June of this year, it launched an internal investigation to assess its current anti-money laundering (AML) systems and controls to establish how effective and efficient they are. The bank revealed its decision to complete the investigation after investors witnessed the regulatory bombshell action taken against Westpac and other major banks.

In April of this year, the FCA fines Standard Chartered Bank £102.2 million for poor AML controls - the second largest financial penalty for AML control failings ever imposed. The FCA investigated two areas of Standard Chartered’s business identified as high risk- its UK Wholesale Bank Correspondent Banking business and its branches in the United Arab Emirates (UAE). The regulator found substantial short comings in their AML controls relating to its customer due diligence and ongoing monitoring processes. Standard Chartered failed to maintain and update risk-sensitive policies and failed to ensure its UAE branches applied UK equivalent AML and counter-terrorist financing controls[2].

Before this, Goldman Sachs (GS) were fined for failures in transaction reporting. GS failed to accurately report an estimated 204.1 million transactions, both UBS and Citigroup have fallen foul of similar requirements and were fined by the FCA. A review carried out by part of GS Internal Audit back in June 2009 established the Firm’s appetite to test the accuracy of the transaction reports rather than their completeness. After the fine, GS agreed to address these weaknesses, the Firm planned to enhance its existing ongoing testing and assurance programme for verifying the completes of transaction reporting.

So what can we take away from this?

More than ever, this year has taught financial institutions that they need to be on their toes - and be proactive. AML and counter terrorism policies need to be forward thinking and up to date, and rather than relying on ambiguity to interpret new regulations, there needs to be open dialogue with the regulator as well as dialogue with its competitors to understand industry best practices.


By Lauren Parmenter, Consultant at Lysis Group

[1] https://www.fca.org.uk/news/news-stories/2018-fines

[2] https://www.fca.org.uk/news/press-releases/fca-fines-standard-chartered-bank-102-2-million-poor-aml-controls