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FCA fines EFG Private Bank £4.2m over money laundering failures

by Michelle Abrego on Apr 24, 2013 at 11:16

FCA fines EFG Private Bank £4.2m over money laundering failures

The Financial Conduct Authority (FCA) has fined EFG Private Bank £4.2 million for failing to take reasonable care to establish and maintain effective anti-money laundering controls for high risk customers.

The regulator said the failings were serious and lasted for more than three years.

The Financial Services Authority (FSA) visited the bank in January 2011 as part of a thematic review on how UK banks were managing money laundering risk in higher-risk situations.

The FSA found that EFG had not fully put its anti-money laundering policies into practice.

It said that 17 of 36 reviewed customer files, opened between December 2007 and January 2011, contained customer due diligence that highlighted significant money laundering risks, but insufficient records of how the bank’s senior management had mitigated those risks.

In 13 of the files, the FSA found that the risks highlighted related to allegations of criminal activity or that the client had been charged with criminal offences including corruption and money laundering.

The regulator said that at the end of 2011 around 400 of EFG’s 3,342 customer accounts were deemed by the firm to present a higher risk of money laundering or reputational risk, and of these 94 were held by politically exposed persons.

EFG is the UK subsidiary of the EFGI Group, a global private banking group based in Switzerland, which provides private banking and wealth management services to high-net-worth individuals.

The FCA said it dealt with overseas jurisdictions recognised as presenting a higher risk of money laundering or bribery and corruption.

The FCA outlined one example where the bank’s due diligence highlighted that a prospective client had acquired their wealth through their father, who was allegedly linked to organised crime, money-laundering and murder. 

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6 comments so far. Why not have your say?

Man of Kent

Apr 24, 2013 at 11:35

Hmm. FSA review in January 2011 results in fine from FCA. This couldn't be one held over to make the FCA look proactive, could it?

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Apr 24, 2013 at 11:42

Seamless passing on from FSA to FCA, it would appear. But where bad behaviour by the regulator (FSA) is concerned, of course, that was a different organisation. Same people but not us, guv.

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Cynical Brit

Apr 24, 2013 at 11:54

Wouldn't it be great if the fine proceeds went into a pot to compensate victims of crime rather than to the Government........ Odds anyone?

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Apr 24, 2013 at 11:55

So, no doubt EFG is guilty of serious failings - however, the fine is a drop in the ocean to them. Why is the FCA not holding senior management personally to account?

On a separate point, I find it very worrying, and unfair, that "the FCA outlined one example where the bank’s due diligence highlighted that a prospective client had acquired their wealth through their father, who was allegedly linked to organised crime, money-laundering and murder."

Is the FCA seriously suggesting that regulated entities should take action on the basis of a client's parent's alledged criminal links? I appreciate that regulators are a law unto themselves but is guilt by alleged association now an offence?

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Compliance Officer

Apr 24, 2013 at 12:04

I think, FP 2012, that they are talking enhanced risk by association which doesn't sound unreasonable at all given the back established that the wealth was acquired from the parent.

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Apr 24, 2013 at 12:27

So if you have an account with any high street bank you are probably all guilty by association. Criminal activity (Barclays - LIBOR) Money Laundering (HSBC, Coutts) and murder (of the banking sector - RBS).

OK, so the last one's a bit tenuous, but in the chase for everyone else's money, it shows that none of the banks can resist getting into the "high net worth" (read high charges, highly profitable) arena. To do so means mixing with a limited number of potential clients with some degree of dirty money, who are quite willing to pay for "exclusive" services at a high price providing no-one asks too many awkward questions about where their wealth comes from.

The Rumanians got it right, just building massive mansions from the cash generated by their "metal trading" businesses (much of it funded by British Rail and church roofs) and ignoring the banks.

Meanwhile, a widow with no driving license, passport (or gun license!) or bank account who just got a payout from her late husband's life policy can't put it anywhere because she fails all the ID checks.

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