NatWest Bank has been fined £265m by the UK’s financial watchdog for failing to prevent nearly £400m of money laundering.
A criminal gang deposited cash in black bin bags across 50 NatWest banks, including £700,000 at one branch, prosecutors said.
It’s the first time that a financial institution has faced criminal prosecution under anti-money laundering (AML) laws by Financial Conduct Authority (FCA) in the UK.
Mrs Justice Cockerill, the sentencing judge at Southwark Crown Court, said that the fine would have been higher but it was reduced because the bank pleaded guilty.
Gold trading business Bradford-based jewellers Fowler Oldfield deposited some £365m over five years despite having an annual turnover of £15m when taken on by NatWest as a client.
The jeweller was shut down after a police raid in 2016 and was marked as high-risk. In 2014, Fowler Oldfield was NatWest’s most lucrative client in the region.
NatWest, which is part of the Royal Bank of Scotland group, said that it regrets failing to watch its customers properly.
The bank’s chief executive Alison Rose said: “NatWest takes its responsibility to prevent and detect financial crime extremely seriously. We deeply regret that we failed to adequately monitor one of our customers between 2012 and 2016 for the purpose of preventing money-laundering.”
Some employees of the bank responsible for handling cash deposits reported their suspicions to the staff in charge of investigating suspected money laundering. However, no appropriate action was taken, the court heard.
The “red flags” reported include significant amounts of Scottish bank notes deposited all over England, deposits of notes with a musty smell, and individuals acting suspiciously when depositing cash in NatWest branches.
Since the introduction of AML and know your customer (KYC) rules, established banks and challenger banks have turned to technology to prevent financial crime.
However, NatWest’s automated transaction monitoring system recognised some cash deposits as cheque deposits incorrectly – a significant gap in the monitoring system of the bank.
“NatWest is responsible for a catalogue of failures in the way it monitored and scrutinised transactions that were self-evidently suspicious,” said Mark Steward, executive director of enforcement and market oversight at the FCA. “Combined with serious systems failures, like the treatment of cash deposits as cheques, these failures created an open door for money laundering.”
In 2020 the FCA updated its AML regulations. Digital bank Monzo is currently under investigation over potential money laundering breaches and faces a potential fine.