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.

Key points:

  • 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.