The FCA has fined Ghana International Bank Plc (GIB) £5,829,900 for poor anti-money laundering and counter-terrorist financing controls over its correspondent banking activities in the period from 1 January 2012 and 31 December 2016 (the "Relevant Period"). GIB breached obligations in the Money Laundering Regulations 2007 (the "ML Regulations"), the applicable legislation at the time. GIB benefitted from a 30% (stage 1) discount under the FCA's executive settlement procedures.
Correspondent banking is the provision of banking-related services by one bank (correspondent) to another bank (respondent) to enable the respondent to provide its own customers with access to those services. It typically operates cross-border and enables customers of the respondent bank to access services in countries where the respondent bank has limited or no operation.
Correspondent banking is regarded as higher risk because the correspondent bank has no direct relationship with underlying customers and is reliant on the respondent bank to undertake customer due diligence to an appropriate standard. The risks are greater where the respondent bank operates in a high-risk jurisdiction.
For these reasons, the ML Regulations (and the EU directives upon which they are based) require banks with correspondent relationships in non-EEA states to apply enhanced due diligence to those relationships, including taking steps mandated in the ML Regulations.
In December 2016, the FCA undertook a supervisory visit to GIB to review its financial crime controls. The FCA found deficiencies in GIB's AML controls regarding its correspondent banking relationships. These included failings in:
- its policies and procedures,
- enhanced due diligence (EDD) and
- enhanced ongoing monitoring
Staff employed to onboard and monitor respondents in accordance with GIB's policies and procedures needed to rely on what the FCA described as "fragmented, confusing and overlapping policies, manuals, frameworks and forms." Although GIB correctly identified correspondent relationships as higher risk requiring EDD, it did not specify what steps should be taken to as part of that EDD. In 2015 the FCA noted that GIB introduced a "Requirements for correspondent banking" checklist. However, this still did not list all the information that staff needed to obtain nor the checks and searches they needed to perform when onboarding a respondent.
Once respondents were onboarded, the FCA found that GIB failed properly to explain to staff how, in relation to respondent banks, they should (1) undertake ongoing monitoring to identify and scrutinise transactions, whether specified types of high-risk transaction or otherwise, and (2) ensure that information was up to date.
During the Relevant Period, GIB commenced correspondent relationships with 14 new customers, all of which were based in non-EEA countries. The FCA determined that there were deficiencies in the due diligence GHIB obtained in respect of all 14 respondents. The FCA found:
- GIB failed to collect sufficient information regarding the purpose and nature of the respondents' businesses, such as the type of market the respondent served or anticipated volume of transactions.
- In a number of cases, GIB failed to perform adverse media checks, which meant that GIB failed to spot that allegations of bribery had been made against one respondent's beneficial owners and directors.
- GIB failed to consistently gather information about the quality of regulatory supervision in the jurisdictions where the respondents were located.
- GIB failed to evidence that it assessed the AML controls of 12 of the 14 respondents that it onboarded. Where it did assess AML controls, the FCA reported that GIB used an inadequate "tick-box" approach.
- GIB failed to consistently obtain senior management approval before establishing a new business relationship: 3 respondents receiving no management sign off at all and in 6 cases GIB was unable to identify the senior manager from illegible or unidentifiable signatures.
- GIB failed consistently to document the responsibilities of the correspondent and respondent bank as required by the ML Regulations.
- GIB did not consistently perform sanctions screening during onboarding.
Failures in relation to ongoing monitoring included not consistently undertaking an annual review of information it held on customers in accordance with GIB policy. This failure meant that in one case GIB failed to record that one Respondent had ceased business some years before.
For a number of years, AML compliance has been a key enforcement priority at the FCA. This latest notice follows similar cases over many years. Indeed, in calculating an appropriate penalty, the FCA regarded it as an aggravating factor that its predecessor the FSA had published three enforcement notices against firms for AML weaknesses both before and during the Relevant Period, and therefore GIB was aware of the importance of implementing robust AML systems and controls.
The supervisory visit which ultimately led to this outcome (and which marked the end of the Relevant Period) took place over five years ago in December 2016. The FCA records that GIB settled "at the earliest opportunity". The case is typical of how long the FCA is currently taking to investigate and conclude cases. In contrast, the three FSA AML cases which the FCA cites in its notice (Habib Bank AG Zurich, Turkish Bank (UK) Limited and Guaranty Trust Bank (UK) Limited) took between 18 to 37 months from the end of the Relevant Period to final outcome.
Given the importance the FCA places on firms scrutinising and taking account of published notices, a significant delay in outcome mitigates the positive effect that enforcement can have in improving compliance.