On 8 August 2013 the Financial Conduct Authority (“FCA”) issued a Final Notice against Guaranty Trust Bank (UK) Limited (“GTBUK”), the fifth in a series of cases arising from the FSA’s 2010 thematic review of banks’ management of higher money laundering risk situations.
GTBUK was fined £525,000 (after the application of a 30% early settlement discount) in what may be regarded as a classic case of a firm failing to follow and/or document compliance with its own policies and procedures in relation to risk assessment, screening, senior management approval, enhanced due diligence and monitoring of higher risk clients. In our e-bulletin we summarise the important aspects of the case. For further information about the earlier enforcement actions arising out of the thematic review, please see our earlier briefing here.
- Customer risk assessments should be adequately documented – it is insufficient simply to have assigned a customer a risk rating if it is unclear how that was determined and what factors were taken into account.
- Firms must give active consideration to information they gather as part of customer due diligence and seek clarification and explanation of missing or inconsistent information.
- Source of wealth/funds information obtained as part of enhanced due diligence must be supported by adequate documentary evidence. Firms should be wary of over-reliance on customer explanations; vague responses should be clarified/challenged.
- Periodic reviews of CDD/EDD information may be necessary to ensure that forms are properly completed and that the information provided substantively makes sense and does not raise red flags.
- Firms should consider how ‘nil results’ from screening are recorded, so that there is a record that the screening has taken place.
- Where a firm’s procedures require particular levels of management sign off, reviews of CDD/EDD at particular intervals, and/or screening to occur at particular intervals, the firm should ensure that these steps are in fact taken.
To read our full e-bulletin please click here.