FCA fines Ghana International Bank £5.8 million for breach of Money Laundering Regulation
Under Regulation 42(1), the Authority is empowered to impose civil penalties upon those who breach the Regulations
The UK’s regulator of financial services firms, the Financial Conduct Authority(FCSA) has fined the Ghana International Bank an amount of £5.8 million.
According to the Regulator, it would have imposed a higher amount as fines if the GIB had not qualified for a 30% discount per its agreement to resolve the matters.
Per its summary of reasons contained in its decision, the FCA notes that the Ghana International Bank breached specifically, Regulation 14(1), 14(3) and 20(1) of the Money Laundering Regulations 2007 by failing to ;
Establish and maintain appropriate and risk-sensitive policies and procedures;
Conduct adequate enhanced due diligence when establishing new business relatinships and
Conduct adequate enhanced ongoing monitoring.
The Money Laundering Regulations 2007 (“the Regulations”) impose duties upon institutions, firms and individuals in respect of customer due diligence (“CDD”) and the Financial Conduct Authority (“the Authority”) has powers at its disposal under the Regulations, which are also used by other government organisations, to sanction those who fail to comply with their requirements.
This overview looks at some of the CDD requirements placed upon firms and the factors the Authority will consider when deciding whether to impose a penalty in the event of non-compliance.
The Regulations
The Regulations are the United Kingdom’s implementation of Directive 2005/60/EC on the Prevention of the use of the Financial System for the purpose of Money Laundering and Terrorist Financing.
In recent years, the Authority has shown a willingness to take individual action against the Money Laundering Reporting Officer (“MLRO”) as well as taking action against the firm. This will hopefully not act as a deterrent to those who wish to take on such a demanding role, but it does highlight the expectation that individuals in these positions must be conversant with their duties.
Criminal Liability
Regulation 45 provides that non-compliance with the Regulations is an either-way offence. When tried on indictment, an offence under Regulation 45 can attract a custodial sentence of up to two years as well as a fine.
There is a statutory defence available to such a charge if the relevant person took all reasonable steps and exercised all due diligence to avoid the offence being committed. In assessing whether there has been a failure, the court must take into account the relevant guidance in place at the time.
The Regulations provide for both individual and corporate liability as Regulation 47 provides that if a body corporate is shown to have committed an offence under Regulation 45 with the consent, connivance or neglect of an officer of the body corporate, the officer and the body corporate are both guilty.
Civil Liability
Under Regulation 42(1), the Authority is empowered to impose civil penalties upon those who breach the Regulations.
The Authority is not the only body that has the ability to use Regulation 42 to impose a civil penalty, as the Office of Fair Trading has its own guidance in this area and the Regulations have also been utilised by HMRC.
In mirroring the statutory defence available to a criminal charge, the Authority must not impose a civil penalty where there are reasonable grounds for it to be satisfied that the person took all reasonable steps and exercised all due diligence to ensure the requirements of the Regulations would be met.
In deciding whether to impose a civil penalty, the Authority will consider any relevant guidance issued by a supervisory authority. The prime example in this context is the Joint Money Laundering Steering Group Guidance (“JMLSG”).
As well as considering the guidance in relation to the activities being provided by the firm or individual, it must first be proven that, as a matter of law, the services being provided are within the ambit of activities covered by the guidance in question: see Thames Valley Payroll Ltd v Revenue and Customs Commissioners [2014] UKFTT 950 TC in relation to accounting and bookkeeping activities.
The FCA further notes that the breaches concerned GIB’s anti-money laundering and counter-terrorist financing controls over its correspondent banking activities in the period between January 1, 2012, and December 31, 2016.
It adds that throughout the relevant period, GIB did not recognize its corresponding banking business as a separate business line or product area but instead included revenue from this business with its other business lines.
Also, the regulator indicates that the GIB’s policies or procedures provided for treatment of the AML risks associated with corresponding banking, references were vague and lacked sufficient detail so that staff undertaking EDD and ongoing monitoring could not adequately fulfil their critical roles in assisting GIB in preventing money laundering and financial crime.
Additionally, the FCA states that the GIB failed to ensure its staff undertook full periodic reviews of the information it held in relation to respondents on an annual basis and in accordance with its own requirements.
Moreover, the GIB also, according to the regulator failed to obtain the needed to scrutinize transactions appropriately using a risk-based approach to ensure that transactions were in keeping with the GIB’s knowledge of the respondent, including their activities and risk profile.