Regulation

FCA fines London bank branch £38m over anti-money laundering failures

By 1 March 2017, 1,772 clients were overdue updated due diligence checks.

Rozi Jones
|
17th June 2020
FCA new
"Commerzbank London’s failings over several years created a significant risk that financial and other crime might be undetected."

The FCA has fined Commerzbank AG (London Branch) £37,805,400 for failing to put adequate anti-money laundering systems and controls in place between 2012 and 2017.

The FCA says Commerzbank London was aware of these weaknesses and failed to take reasonable and effective steps to fix them despite the FCA raising specific concerns in 2012, 2015 and 2017.

These weaknesses also persisted during a period when the FCA was publishing guidance on steps firms could take to reduce financial crime risk as well as taking enforcement action against a number of firms in relation to AML controls.

The FCA’s investigation identified failings in a number of areas, including Commerzbank London’s failure to conduct timely periodic due diligence on its clients, which resulted in a significant number of existing clients not being subject to timely know-your-client checks. By 1 March 2017, 1,772 clients were overdue updated due diligence checks. A material number of these clients were able to continue to transact with the bank’s London branch due to the implementation of an exceptions process, which was not adequately controlled or overseen and which became "out of control" by the end of 2016.

Additionally, the FCA claims the bank failed to address long-standing weaknesses in its automated tool for monitoring money laundering risk on transactions for clients. For example, in 2015 Commerzbank London identified that 40 high-risk countries were missing and 1,110 high-risk clients had not been added.

The FCA says that Commerzbank London has since undertaken a "significant remediation exercise" to bring its AML controls into compliance.

It has also conducted an extensive look-back exercise to identify suspicious transactions during the period in question. Commerzbank London also voluntarily implemented a wide-ranging business restriction, which included temporarily stopping taking on new high-risk customers and suspending all new trade finance business activities.

Commerzbank London agreed to resolve the matter at an early stage of the investigation and therefore qualified for a 30% discount. Without the discount, the financial penalty would have been £54,007,800.

Mark Steward, executive director of enforcement and market oversight at the FCA, said: "Commerzbank London’s failings over several years created a significant risk that financial and other crime might be undetected. Firms should recognise that AML controls are vitally important to the integrity of the UK financial system."

In a statement, Commerzbank said: "Commerzbank has cooperated fully with the Financial Conduct Authority (FCA) to mitigate any potential compliance risks promptly and appropriately. The FCA investigation found no actual financial crime.

"The FCA investigation relates to the time period of October 2012 to September 2017. The Bank has successfully remediated and addressed the deficiencies that were the subject of the investigation. During this period of remediation, Commerzbank has implemented new and enhanced anti-money laundering systems, processes and controls.

"The Bank has taken the findings of the regulator very seriously. Commerzbank London has therefore undertaken a significant remediation exercise. Commerzbank is committed to ensuring that our business fully complies with the regulatory requirements. This has the highest priority at the Bank."

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