09 Dec 2015
British multinational bank, Barclays, received a damning review from the Financial Conduct Authority (FCA) last week, which has resulted in one of the biggest fines for AML failings in UK history.
The £72 million penalty was issued to the bank following the FCA review, which highlighted Barclays’ incompetence and poor handling of financial crime risks. The report included details of its failure to ensure that a transaction worth £1.88 billion conducted in 2011 and 2012 was not being used to fund criminal activity.
The Barclays clients in question were Politically Exposed Persons status, which meant that the bank should have treated them as being at risk from exposure to bribery or corruption and carried out much more stringent levels of due diligence and monitoring in order to comply with financial crime requirements.
It was found that Barclays did not carry out the necessary higher security measures, choosing to ignore its standard procedures and policies for the greater convenience of its client. Instead of responding correctly to the risk profiles of the clients by complying with the necessary regulations, the bank chose not to collect the required information on source of wealth, and went so far as to lower the clients’ risk profile to accommodate a swift transaction.
Ultimately, Barclays chose to take a gamble for the sake of the £52.3 million revenue that would have been generated by the transaction and has ended up with the biggest penalty the FCA and its predecessor, the FSA, has issued to date. While the FCA found no proof that Barclays had in fact facilitated crime as a result of the transaction, the fact that the conduct concerned took place as recently as 2011-2012, by which time other large banks were already being fined huge sums for AML lapses, is a depressing indication that cultural change towards compliance remains a work in progress
The failings in this case were not complex. Nor is the reason why they occurred. Money talks. Until relationship managers are rewarded not only for the business which they write, but also for positive compliance attributes of the clients which they bring onboard, scandals such as this will continue to reoccur with a monotonous regularity.
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