National Westminster Bank Plc, aka NatWest, was fined £264,772,619.95 in the first time the FCA has pursued criminal charges for money laundering failings.
NatWest was sentenced for three offenses of failing to comply with money laundering regulations. The bank pleaded guilty at Westminster Magistrates Court on 7 October.
Justice Cockerill, the sentencing judge at Southwark Crown Court, made clear that NatWest was vital for the crimes but was in no way complicit.
“It must be borne in mind that although in no way complicit in the money laundering which took place, the Bank was functionally vital. Without the Bank – and without the Bank’s failures – the money could not be effectively laundered.”
Several “Red Flags” But No Action Taken
The charges regard a failure to properly monitor the activity of a commercial customer, Fowler Oldfield, a jewelry business based in Bradford, between 8 November 2012 to 23 June 2016.
Fowler Oldfield deposited £365 million with the bank, of which around £264m was in cash, despite many red flags spotted and reported by the bank’s employees.
The ‘red flags’ that were reported included significant amounts of Scottish banknotes deposited throughout England, deposits of notes carrying a prominent musty smell, and individuals acting suspiciously when depositing cash in NatWest branches.
In addition, the bank’s automated transaction monitoring system incorrectly recognized some cash deposits as cheque deposits. As cheques carry a lower money laundering risk than cash, this was a significant gap in the bank’s monitoring of a large number of customers depositing cash, of which Fowler Oldfield was one.
Employees who were responsible for handling these cash deposits reported their suspicions to bank staff responsible for investigating suspected money laundering, but no appropriate action was ever taken.
Mark Steward, Executive Director of Enforcement and Market Oversight at the FCA, said: ‘NatWest is responsible for a catalog of failures in the way it monitored and scrutinized transactions that were self-evidently suspicious. Combined with serious systems failures, like the treatment of cash deposits as cheques, these failures created an open door for money laundering.
“Anti-money laundering controls are a vital part of the fight against serious crime, like drug trafficking, and such failures are intolerable ones that let down the whole community, which, in this case, justified the FCA’s first criminal prosecution under the Money Laundering Regulations.”