The banking giant admits guilt in a case of failing to adequately monitor the accounts of a key customer.
A large bank is guilty of violating the United Kingdom’s money-laundering regulations.
Says the bank itself.
FTF News readers, who are familiar with all the ploys financial institutions employ to avoid saying they’ve done wrong (all that neither-confirming-nor-denying while paying up and agreeing to be censured), will know just how unusual that is.
Last week, National Westminster Bank Plc aka, NatWest, a subsidiary of the NatWest Group Plc (formerly known as the Royal Bank of Scotland Group plc), entered guilty pleas at Westminster Magistrates’ Court to criminal charges brought by the Financial Conduct Authority (FCA) under the Money Laundering Regulations 2007 (MLR 2007), according to a statement by the FCA.
NatWest “accepts that it failed to comply” with three specific provisions of those regulations between November 2012 until June 2016 “in relation to the accounts of a UK incorporated customer,” according to the FCA statement.
The regulations NatWest violated “require certain firms, including those regulated by the FCA, to ensure they have adequate anti-money laundering systems and controls to prevent money laundering.”
A NatWest statement acknowledges its failure to comply with regulations that “required the firm to determine and conduct risk sensitive ongoing monitoring of its customers for the purposes of preventing money laundering. The offences relate to operational weaknesses between 2012 and 2016 which meant that NatWest did not adequately monitor the accounts of that customer.
“NatWest has cooperated fully with the FCA since its investigation began,” the statement continues. “The FCA has confirmed it will not take action against any individual current or former employee of NatWest. NatWest is not aware of, and is not anticipating, any other authority investigating its conduct in this matter.”
NatWest also points out that it has “invested almost £700m [$952 million] in the last five years including upgrades to transaction monitoring systems, automated customer screening and new customer due diligence solutions,” and that it has “more than 5,000 staff in specialist financial crime roles, dedicated to detecting and preventing financial crime under the leadership and focus of a centralised bank-wide ‘FinCrime Hub.’
“As part of its ongoing programme of investment in its people, processes and technology, NatWest’s financial plans already include over £1bn [$1.4 billion] to further strengthen financial crime controls over the next five years, including investment in new technologies and capabilities to further enhance Customer Due Diligence, Transaction Monitoring, Sanctions and Anti-Bribery and Corruption systems,” according to the NatWest statement.
“A provision will be made in NatWest’s Q3 2021 financial accounts in anticipation of a potential fine being imposed at that hearing,” according to the bank’s statement, which points out that financial crimes continue to “evolve, whether through fraud, scams, cyber-attacks or other criminal activity. NatWest continues to make significant, multi-year investments to strengthen and improve its overall financial crime control framework with prevention systems and capabilities. The bank has invested almost £700m in the last five years including upgrades to transaction monitoring systems, automated customer screening and new customer due diligence solutions.
NatWest CEO, Alison Rose, also struck a note of contrition in her statement.
“We deeply regret that NatWest failed to adequately monitor and therefore prevent money laundering by one of our customers between 2012 and 2016. NatWest has a vital part to play in detecting and preventing financial crime and we take extremely seriously our responsibility to prevent money laundering by third parties,” Rose said.
“In the years since this case, we have invested significant resources and continue to enhance our efforts to effectively combat financial crime,” she added in the statement. “We work tirelessly with colleagues, other banks, industry bodies, law enforcement, regulators, and governments to help find collaborative solutions to this shared challenge. These partnerships are crucial to counter the significant and evolving threat of financial crime to society.”
Fitch Ratings, the well-known American credit rating agency, also issued a statement saying that it foresaw “no immediate rating impact on National Westminster Bank … or the wider NatWest Group … given the likely size of the fine and the fact that the failings relate to a single client and do not appear to be widespread.”
The ratings agency’s expectation is that NatWest will “face a fine of between GBP200 million and GBP400 million [$272 million to $544 million] when it is sentenced in December. This would not be enough to materially affect the bank’s strong capitalization or other key credit metrics, and would be consistent with Fitch’s expectations published in March when proceedings began.”
The ratings agency adds that the “risk of any of the bank’s licences being revoked due to the finding of criminal guilt is small,” and it does not “expect the resulting reputational damage to significantly affect the bank’s strong franchise in the UK. However, it remains to be seen whether foreign authorities, particularly in the US, will apply restrictions to limit dealings with NWG.”
This is the first criminal prosecution under the MLR 2007 by the FCA, the authority points out, noting that the NatWest case “has now been referred to the Southwark Crown Court for sentencing.”
FTF News contacted two NatWest media representatives for comment, asking if the possible damage to the bank’s future reputation and bottom line affected the bank’s action.
By deadline, there was no reply.