Bank of Beirut failings lead to punishments for the Bank and individuals

Posted on 31 May 2015

Bank of Beirut failings lead to punishments for the Bank and individuals

5 March 2015

The FCA has fined Bank of Beirut (UK) Ltd £2.1m and placed a restriction on it that prevents it from acquiring new customers from "high-risk jurisdictions" (being jurisdictions that have a low score in Transparency International’s Corruption Perceptions Index) for 126 days. The FCA found that Bank of Beirut had failed to adequately mitigate the risk that the firm would be used for financial crime. Had the Bank not settled at an early stage, the fine would have been £3m and the restriction 180 days.

Essentially, following visits in 2010 and 2011, the Authority became concerned that the culture at the Bank was one of insufficient consideration of risk or regulation despite the high risk that its business might be exploited to facilitate financial crime. Remediation was agreed with the Bank. However, the Bank not only failed to implement all of the agreed remediation, but it also repeatedly provided the FCA with inaccurate information to suggest that it had done so. The FCA determined that this was in breach of Principle 11 (open and cooperative). The FCA found that Anthony Wills (the compliance officer) and Michael Allin (the internal auditor) were responsible for addressing a number of the FCA’s concerns highlighted during the 2010 and 2011 supervisory visits, and that both had provided misleading information to the FCA. Both were in breach of Principle 4 for Approved Persons (open and cooperative).

The FCA fined Wills £19,600 and Allin £9,900, respectively for failing to deal with the FCA in an open and cooperative way when responding to the regulator’s questions about the actions taken by the firm to mitigate financial crime risk. Had they not settled early, their fines would have been £28,000 and £14,100 respectively.

Copies of the Final Notices can be found for Bank of Beirut, Wills and Allin.


It is interesting that financial crime is the backdrop to these cases. The sanctions were relatively serious; all breaches were considered as being towards the more serious end when it came to assessing the level of penalty, and the restriction on the firm was relatively punitive (see below). These levels of sanction chime with the FCA's pronouncement that one of the key areas of risk focus it has identified for this year is financial crime (see elsewhere in this issue "FCA publishes its Business Plan").

It is also interesting as the second example of a case where the FCA has used its restriction powers. The first was last year in the case of Financial Limited and Investments Limited (see Enforcement Watch 14 "23 July 2014: FCA makes first use of its restriction powers"). In that case, the restriction was imposed as an alternative to a financial penalty. In the case of Bank of Beirut, however, the FCA imposed the restriction in addition to a financial penalty. This is consistent with the FCA's policy on restrictions, which the FCA views as primarily being a deterrent. In this case, the FCA considered that the restriction would be a more effective and persuasive deterrent than the imposition of a financial penalty alone. In this respect, it is noteworthy not only that (as described above) the FCA considered the breach to be towards the most serious end of the scale when it considered the penalty, but also that the potential customers who were the subject of the restriction were based in countries that included the Bank's core overseas markets.

In some respects, these are cases that relate to culture, which is a hot topic for the FCA. What is interesting about the action against individuals is that it was limited to action against two who were not senior management. Indeed, both argued that they had been influenced by senior management to do what they had done. While the FCA agreed that they had been influenced, the FCA found that their roles required them to stand up to such influence. These look like cases where senior management would also have been in the frame if the new personal accountability regime for senior managers had already come into force.

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