Malta: Lombard Bank fined €340,000 by FIAU over money laundering shortcomings
02 Nov 2020

Lombard Bank has been fined €340,058 for breaching anti-money laundering obligations by the Financial Intelligence Analysis Unit.

The breaches were identified by the FIAU in an inspection on the bank carried out in September and October 2019. The bank said they did not relate to suspicions or evidence of money laundering,” the bank said.

Lombard said in a statement it was committed prevent the use of its services for any form of illicit activity. “Indeed, as a matter of policy it does not enter into business relations with those involved in sectors considered to carry inherent AML/CFT risks while it continues to strengthen its defences to this end.”

Lombard Bank will be appealing against the decision.

But the FIAU said Lombard’s business risk assessment did not provide a holistic understanding of the various risk factors that may arise out of the bank’s activities, which did could not comprehend which areas of risk required the strongest controls.

The FIAU also said the bank’s customer risk assessment procedures were not rigorous and comprehensive enough. “Consequently the Bank was not able to understand the risks posed by customers and to effectively apply the measures required to mitigate the risk identified in line with the risk-based approach… the bank did not outline how for example a customer involved in a high risk business who requested a low risk product would be ultimately risk rated.”

The FIAU also found a number of files in which the required enhanced due diligence measures (EDD) were either not carried out or deemed to be inadequate.

In one particular case, the bank had increased one of its customer’s risk rating to high throughout the course of the business relationship in view of a change in circumstances which warranted an increase in this customer’s risk. But the “satisfactory evidence” the bank claimed to [have] could not [be used to] verify the provenance of the funds and therefore even the close monitoring carried out was rendered ineffective.

In one client file involving a politically exposed person, the bank failed to apply EDD that would address the high risk emanating from PEPs. This in view that despite being aware of the customer’s political involvements, the bank failed to establish the Source of Wealth (SoW) and Source of Funds (SoF). “This is required in order to be satisfied that the customer does not handle proceeds derived from corruption or other criminal activities which are increased risks known to be associated with customers who are PEPs.”

Lombard also failed to obtain sufficient information to establish the purpose and intended nature of the business relationships it maintained with its customers. Three files contained inadequate information recorded to satisfy the sources of wealth requirements. “These files either had no information at all, or the information held on file did not provide enough detail to support the activities that generated the customer’s overall accumulation of wealth.”

Doubts were also raised as to how a bank, having such a size and customer base could update its records manually, something which as evidenced from the findings of the compliance review, was not being achieved by the bank.

Serious shortcomings were identified in relation to the bank’s obligation to scrutinise transactions taking place through the customers’ accounts.

By Nicole Meilak, Malta Today, 30 October 2020

Read more at Malta Today

Photo (cropped and edited): Frank Vincentz / CC-BY-SA-3.0

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