NatWest was fined £264,772,619.95 at Southwark Crown Court yesterday for three offences of failing to comply with money laundering regulations. The bank had pleaded guilty at Westminster Magistrates Court on October 7. The regulator the Financial Conduct Authority (FCA) says this is the first time the FCA has pursued criminal charges for money laundering failings.
The charges covered NatWest’s failure to properly monitor the activity of a commercial customer, Fowler Oldfield, a buyer and seller of jewellery based in Bradford and a commercial customer of NatWest, between November 2012 and June 2016. When taking on the customer, NatWest initially understood it would not handle cash from the Fowler Oldfield business. However, over the course of the customer relationship about £365m was deposited with the bank, of which around £264m was in cash.
Mark Steward, Executive Director of Enforcement and Market Oversight at the FCA, said after the case: ‘NatWest is responsible for a catalogue of failures in the way it monitored and scrutinised 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.’
For the sentencing remarks of Mrs Justice Cockerill, visit https://www.judiciary.uk/judgments/r-v-national-westminster-bank/. The bank’s fine was cut by one-third due to its early guilty pleas. The bank stated that it had been attempting, as was accepted by the FCA, to improve its systems and to comply with its obligations. Also accepted was that the bank had an ‘open and constructive’ relationship with the FCA – reflected in extensive agreement on the key facts and submissions on sentence.
NatWest CEO, Alison Rose, said: “NatWest takes its responsibility to prevent and detect financial crime extremely seriously. We deeply regret that we failed to adequately monitor one of our customers between 2012 and 2016 for the purpose of preventing money laundering.” The bank will continue to invest significant resources in the fight against financial crime, she added.
The bank states that it has more than 5,000 staff in specialist financial crime roles, dedicated to detecting and preventing financial crime under the leadership and focus of a centralised, bank-wide ‘FinCrime Hub’.
A separate investigation by West Yorkshire Police has led to 11 people pleading guilty to charges relating to the cash deposits and three cash couriers being charged. A further 13 individuals are awaiting trial at Leeds Crown Court in April 2022 in relation to the activities of Fowler Oldfield.
In the years 2011 to 2016, the NatWest followed a risk-based approach to anti-money laundering (AML), meaning that each of its customers was assigned a risk rating after a customer risk assessment.
Some of the bank’s employees, who were responsible for handling these cash deposits, reported their suspicions to bank staff responsible for investigating suspected money laundering; however no appropriate action was ever taken. The ‘red flags’ as reported included significant amounts of Scottish bank notes deposited around 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 recognised 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.
