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A “sleeping lion” wakes as NatWest pleads guilty in criminal money launding case

"You're depositing *how much* cash?"

NatWest has plead guilty to criminal money laundering charges brought by the Financial Conduct Authority (FCA) — after a UK customer paid £264 million in cash into their account, unquestioned, between 2011 and 2016.

The landmark case will have seismic repercussions across the industry.

NatWest was charged under the Money Laundering Regulations (MLR) 2007. (The MLR has since been superseded by the Money Laundering, Terrorist Financing and Transfer of Funds Regulations 2017.)

he case is the first criminal prosecution under the MLR 2007 by the FCA.

The FCA said on October 7, 2021: “NatWest accepts that it failed to comply with regulation 8(1) between 7 November 2013 until 23 June 2016; and regulations 8(3) and 14(1) between 8 November 2012 until 23 June 2016 under MLR 2007 in relation to the accounts of a UK incorporated customer.”

See also: FCA eyes market surveillance SaaS refresh with £3.5m contract

The markets watchdog added: “These regulations require certain firms, including those regulated by the FCA, to ensure they have adequate anti-money laundering systems and controls to prevent money laundering.”

The case has now been referred to the Southwark Crown Court for sentencing.

The successful prosecution comes as the FCA is investing over £120 million over three years in IT and data tools to help spot market abuse and as it builds up a highly regarded team, in the wake of appointing a new COO and Chief Data, Information and Intelligence Officer in February 2021.

Describing the MLR as “a money laundering sleeping lion”, Carmelite Chambers’ barrister Mark Watson said: “The prosecution of NatWest and the demonstration by the FCA that the Regulations have teeth could be the first step in another sea change in commercial culture, this time in financial services”.

FCA cases, April 2020 – April 2021. Source: FCA enforcement data.

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 majority state-owned bank out.

Research & Markets predicts the global AML software market to be worth $3.7 billion by 2026. The prosecution is a stark reminder 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.

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