NatWest admits weaknesses in anti-money laundering systems
NatWest admitted that operational failures, including weaknesses in automated monitoring systems, meant it had failed to prevent the Â£ 400million money laundering.
The bank pleaded guilty in Westminster Magistrates’ Court for failing to comply with anti-money laundering regulations between 2012 and 2016.
Financial Conduct Authority (FCA) regulations mean that financial companies must have adequate anti-money laundering systems and controls.
Anti-money laundering software automates monitoring of suspicious activity on a bank’s network, but NatWest has failed to identify and stop money laundering by a jewelry store in Bradford, which included deposits of up to Â£ 1.8 million per day.
NatWest CEO Alison Rose said, âWe deeply regret that NatWest failed to adequately monitor, and therefore prevent, money laundering by one of our clients between 2012 and 2016. In the years since this case, we have invested significant resources and continue to improve our efforts to effectively combat financial crime.
Rose said the bank has since invested hundreds of millions of pounds, improving transaction monitoring systems and automating customer screening systems. Another Â£ billion has been allocated for financial crime checks over the next five years.
The case has now been returned to Southwark Crown Court for sentencing. This is the first criminal prosecution initiated by the FCA under the 2007 Money Laundering Regulations.
Money laundering, and its links to organized crime, is a serious global problem with banks at the center. According to the UN, up to $ 2 billion is illegally displaced each year, with criminals using banks to hide money. In the UK, the National Crime Agency estimates that Money laundering costs the country’s economy Â£ 24 billion each year.
Banks that did not respect anti-money laundering rules have been heavily condemned by regulators.
According to a study published in February 2021 by business-to-business information services company Kyckr, 28 financial institutions around the world were fined for anti-money laundering violations in 2020, equivalent to around 2 , Â£ 6 billion.
The German neo-bank N26 was recently fined 4.25 million euros by the German financial services regulator for weak anti-money laundering practices linked to the late filing of around 50 returns suspicious activity in 2019 and 2020.
But there were much higher fines. Swedbank was fined 347 million euros by Swedish and Estonian regulators in 2020 for breaking money laundering laws, Dutch bank ING was fined 775 million euros in 2018 for failing to prevent the laundering of hundreds of millions of euros between 2010 and 2016, and in 2017, Citigroup agreed to pay nearly $ 100 million and admitted criminal violations by settling an investigation into anti-money laundering rule violations involving money transfers between the United States and Mexico.
Faced with the heavy financial costs of non-compliance with anti-money laundering regulations, banks are investing in technology to automate prevention. These include technologies that use artificial intelligence and machine learning to detect suspicious activity within huge data sets.