Regulator fines Standard Chartered £102.2m over poor AML controls

The Financial Conduct Authority (FCA) has fined Standard Chartered Bank £102.2m for anti-money laundering (AML) breaches in two higher risk areas of its business, marking the second-largest financial penalty for AML control failings ever imposed by the regulator.

The watchdog investigated two areas of Standard Chartered Bank’s business that the firm identified as higher risk; its UK wholesale bank correspondent banking business and its branches in the United Arab Emirates (UAE).

The FCA revealed serious and sustained shortcomings in the bank’s AML controls relating to customer due diligence and ongoing monitoring. Standard Chartered failed to establish and maintain risk-sensitive policies and procedures, and failed to ensure its UAE branches applied UK equivalent AML and count-terrorist financing controls.

In compliance with the Money Laundering Regulations 2007 (MLRs), the bank was required to establish and maintain appropriate and risk sensitive policies and procedures to reduce the risk it may be used to launder the proceeds of crime, evade financial sanctions or finance terrorism.

Furthermore, the MLRs also imposed a duty on Standard Chartered to require its global (non-EEA) branches and subsidiaries to apply policies and procedures in relation to due diligence and ongoing monitoring that are equivalent to those required of Standard Chartered in the UK.

The failings occurred on the bank’s UK Correspondent Banking business between November 2010 to July 2013 and its UAE branches between November 2009 and December 2014.

Commenting, FCA director of enforcement and market oversight Mark Steward said: “Standard Chartered’s oversight of its financial crime controls was narrow, slow and reactive. These breaches are especially serious because they occurred against a backdrop of heightened awareness within the broader, global community, as well as within the bank, and after receiving specific attention from the FCA, US agencies and other global bodies about these risks.”

The US authorities have also taken action against the Standard Chartered group for significant violations of US sanctions laws and regulations.

“Standard Chartered is working to improve its AML controls to ensure all issues are fully addressed on a global basis. The FCA has taken into account Standard Chartered’s remediation work and its cooperation in assisting the FCA investigation, without which today’s financial penalty would have been even higher,” Steward added.

The bank did not dispute the regulator’s findings and, under the FCA’s partly contested case process, exercised its right to request that the FCA’s regulatory decisions committee assess the appropriate level of sanction. As Standard Chartered accepted the findings, it qualified for a 30 per cent discount, avoiding a financial penalty of £146m.

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