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The UK's Financial Conduct Authority (FCA) has imposed a £107.7m fine on Santander UK over "serious and persistent gaps" in the bank’s anti-money laundering (AML) controls that affected business banking customers.
According to the regulator, between December 31, 2012 and October 18, 2017, Santander had ineffective AML systems in place which significantly affected the oversight of the accounts of more than 560,000 business customers.
Specifically, the bank could not verify whether the information its customers gave about the type of business they carried out was correct. Santander was also unable to monitor the money customers had told them would be going through their accounts compared with what actually was being deposited.
For instance, in one case the FCA singled out, Santander opened an account to a new customer who told the bank it was a small translations business with expected monthly deposits of £5,000.
But in the following six months, the customer was receiving millions in deposits and swiftly transferring the money to separate accounts.
Santander’s own AML team flagged the account in March 2014 and urged the bank to close it, but poor processes and structures meant that this was not acted upon until September 2015. During that time millions of pounds continued to flow through the account.
In September 2015, the account was kept open at the request of law enforcement but Santander did not keep track of the request and left the account open until the FCA wrote to the bank in December 2016.
In other cases, the FCA found that Santander could not promptly deal with red flags associated with suspicious activity, such as automated monitoring alerts.
During the five years, more than £298m passed through the bank that the FCA says could be related to money laundering, before the bank closed the accounts.
“Santander’s poor management of their anti-money laundering systems and their inadequate attempts to address the problems created a prolonged and severe risk of money laundering and financial crime,” Mark Steward, executive director of enforcement and market oversight at the FCA, said.
Santander did not dispute the findings and agreed to settle with the regulator, which saved the bank more than £46m, a 30 percent discount from the original £154m fine.
Santander CEO Mike Regnier said the bank “takes its responsibilities regarding financial crime extremely seriously”.
“We are very sorry for the historical AML-related controls issues.”
The bank pointed out that the FCA fine is primarily based on a proportion of the revenues of Santander UK’s business banking division over the investigated period and that business banking customers formed 4 percent of Santander’s customer base in 2017.
“While we took action to address our AML issues once they were identified, we accept that our AML framework at the time should have been stronger,” the CEO acknowledged.
Regnier said that the bank has made significant changes to address AML issues by overhauling its financial crime technology, systems and processes, and the bank now employs more than 4,400 staff focused on preventing financial crime.
He added that the bank “continue[s] to invest to meet our responsibilities and keep our customers and communities safe”.
FCA fines
In recent years, there has been a noticeable increase in AML-related actions initiated by the FCA, which have resulted in millions of pounds of penalties on large banks.
In 2019, the agency fined Standard Chartered £102.2m for AML weaknesses, while last year HSBC and NatWest were handed respective fines of £63.9m and £264.8m.
In fact 2021 was a record year in terms of fines, with the authority handing out more than £567m in total penalties.
The Santander fine represents the largest to date in 2022, representing more than 60 percent of the total £175m in fines in 2022.
