On 7 October at Westminster Magistrates’ Court, NatWest entered guilty pleas to three counts of failure to prevent money laundering under the Money Laundering Regulations 2007 (MLR 2007). The charges were brought by the Financial Conduct Authority ('FCA'). The bank admitted 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 and 23 June 2016, in relation to the accounts of a UK incorporated customer.
The UK customer was Yorkshire-based gold dealership Fowler Oldfield Ltd. Between 7 November 2013 and 23 June 2016, Flower Oldfield deposited £365 million into its NatWest accounts, £264 million of which was in cash. Flower Oldfield subsequently shut down after police raided their premises in 2016.
The case has been sent to Southwark Crown Court for sentencing and the FCA intends to recommend a fine in the region of £340m.
This case is noteworthy for a number of reasons. Firstly, it is the first criminal prosecution brought under the MLR 2007 by the FCA. It also confirms the FCA's decision and the wishes of its CEO to become a more assertive, confident, decisive and agile regulator. This same sentiment was expressed by the FCA's Chairman Charles Randall at the FCA's Annual Public Meeting, which took place on the 28 September, where he stated that the regulator was undertaking a broad programme of change to become a more proactive and assertive regulator.
The FCA's decision to pursue a criminal prosecution where a civil resolution was available should alert firms to how committed the regulator is to making full use of its powers in cases of tackling wrongdoing. Having already suffered criticism that it was slow to act in previous cases, the FCA has signalled that it will take a strict approach with offending parties in the future. The regulations under which NatWest was prosecuted do not require proof that money laundering has taken place.
The case serves as a reminder of the need for firms to have adequate procedures in place to prevent money laundering, particularly as it relates to ongoing monitoring of customer relationships. At the outset of its relationship with Fowler Oldfield, it was agreed that NatWest would not handle cash deposits for the dealership, but across the relevant period it nevertheless accepted £264 million in cash. Indeed on one single day the dealership deposited £1.8 million in cash with the bank.
"Adequate risk-based due diligence and monitoring of client relationships must be an ongoing exercise for corporate entities who wish to safeguard themselves in the face of closer regulatory scrutiny and what promises to be an aggressive prosecutorial landscape going forward. Banks and other regulated firms must ensure that their systems are fit for purpose" - Johanna Walsh, Partner in the White Collar Crime & Investigations Group