The Financial Conduct Authority (FCA) has begun criminal proceedings against NatWest over alleged catastrophic AML failures after a UK customer paid £264m in cash into their account between 2011 and 2016 without facing tough questions.
That's equivalent to more than £1 million per week in cash deposits.
The criminal case is being brought under the Money Laundering Regulations 2007 and is the first criminal prosecution under the MLR 2007 by the FCA and the first such prosecution under the MLR against a bank.
NatWest is 62% owned by the UK government.
The FCA alleged that "NatWest failed to adhere to the requirements of regulations 8(1), 8(3) and 14(1) of MLR 2007. These regulations require the firm to determine, conduct and demonstrate risk sensitive due diligence and ongoing monitoring of its relationships with its customers for the purposes of preventing money laundering."
The news caps off a grim year for NatWest, which February 2021 reported a full year 2020 operating loss of £351 million, although it managed to trim £277 million in costs during 2020.
With banks around the world investing heavily in know your customer (KYC) and anti-money laundering (AML) technologies and processes, peers in the financial services sector will be stunned that such an "old school" issue of major cash deposits appears to have caught the bank out -- without alarms going off upstream.
"It is alleged that NatWest's systems and controls failed to adequately monitor and scrutinise this activity" the FCA said. NatWest is scheduled to appear at Westminster Magistrates’ Court on 14 April 2021.
Research & Markets predicts the global AML software market to be worth $3.7 billion by 2026.
The prosecution is a stark reminder, however, that without proper training and processes in place, technology alone is not going to keep banks -- which also face a deluge of alerts daily -- out of trouble.
NatWest said: "Since being notified of this investigation in July 2017, NatWest Group has disclosed that the FCA was undertaking an investigation into NatWest Group’s compliance with the MLR 2007. NatWest Group has been co-operating with the FCA’s investigation to date. NatWest Group takes extremely seriously its responsibility to seek to prevent money laundering by third parties and accordingly has made significant, multi-year investments in its financial crime systems and controls."
