Commerzbank London slammed with £37.8 million fine
18 June 2020 London
Image: Yuganov Konstantin/shutterstock.com
Commerzbank London has received a fine of £37,805,400 by the Financial Conduct Authority (FCA) over anti-money laundering (AML) failures.
The bank was found to have inadequate AML systems and controls in place between October 2012 and September 2017.
The FCA said it raised specific concerns about these weaknesses in 2012, 2015 and 2017 to Commerzbank London but the bank failed to take reasonable and effective steps to fix them.
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 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.
According to FCA, 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, Commerzbank London 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 to the transaction monitoring tool.
The FCA also noted that the bank failed to have adequate policies and procedures in place when undertaking customer due diligence on clients.
Commerzbank London has undertaken a significant remediation exercise to bring its AML controls into compliance.
It was explained that a “skilled person” has been testing the effectiveness of these enhancements, and their work is now complete.
In addition to this, Commerzbank London has 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 percent discount. Without the discount, the financial penalty would have been £54,007,800.
FCA executive director of enforcement and market oversight, Mark Steward, 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.”
Firms operating in the UK, including branches of overseas firms, must take reasonable care to organise and control their affairs responsibly and effectively, and to establish and maintain an effective risk-based AML control framework, the FCA highlighted.
The bank was found to have inadequate AML systems and controls in place between October 2012 and September 2017.
The FCA said it raised specific concerns about these weaknesses in 2012, 2015 and 2017 to Commerzbank London but the bank failed to take reasonable and effective steps to fix them.
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 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.
According to FCA, 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, Commerzbank London 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 to the transaction monitoring tool.
The FCA also noted that the bank failed to have adequate policies and procedures in place when undertaking customer due diligence on clients.
Commerzbank London has undertaken a significant remediation exercise to bring its AML controls into compliance.
It was explained that a “skilled person” has been testing the effectiveness of these enhancements, and their work is now complete.
In addition to this, Commerzbank London has 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 percent discount. Without the discount, the financial penalty would have been £54,007,800.
FCA executive director of enforcement and market oversight, Mark Steward, 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.”
Firms operating in the UK, including branches of overseas firms, must take reasonable care to organise and control their affairs responsibly and effectively, and to establish and maintain an effective risk-based AML control framework, the FCA highlighted.
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