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The FCA continues to take a tough stance on financial crime failures

Posted on 27 June 2022

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The Financial Conduct Authority (FCA) has issued fines totalling £13.6 million against two companies, JLT Specialty Limited (JLTSL) and Ghana International Bank Plc for failures regarding their financial crime controls.

On 22 June, the FCA announced that it had fined JLTSL £7,881,700 for financial crime control failings which in one instance allowed bribery of over $3 million to take place. In summary, JLTSL placed business in the London reinsurance market for another company in the JLT group, JLT Re Colombia. Between 21 November 2013 and 6 June 2017, JLTSL paid $12.3 million in commission to JLT Re Colombia, which in turn paid $10.8 million to a third-party introducer. The introducer subsequently paid over $3m to Government officials at a state-owned insurer to help retain and secure their business for JLTSL and JLT Re Colombia.

The Final Notice, dated 16 June 2022, set out a detailed set of failings including potential red flags not being brought to the attention of the KYC or Financial Crime Team, and all relevant information about an overseas introducer not being disclosed to the Financial Crime Team for review.

When the wrongdoing came to light, JLTSL self-reported to the FCA in 2017. It cooperated with the FCA's investigation and provided the FCA with access to materials from an internal investigation that was carried out by the JLT Group plc. JLTSL's actions in this regard helped to mitigate the level of the fine that the FCA decided to impose. However, this was not the first time that JLTSL had been fined by the FCA. JLTSL had previously received a fine in December 2013 for similar risk control failures.

The FCA identified JLTSL "lax controls" as the reason for over $3 million being paid to corrupt government officials.

In the case of Ghana International Bank plc, no actual wrongdoing was uncovered but the FCA found that the Bank's poor controls meant that there was a significant risk of money laundering taking place.

Ghana International Bank plc provides correspondent banking services to various overseas banks. The FCA visited Ghana International Bank plc in December 2016 to review its financial crime controls. The regulator found that over a four year period which began in January 2012, Ghana International Bank plc committed a number of AML infractions which included:

  • Failing to adequately perform the additional checks that it was required to when entering into relationships with overseas banks;
  • Being unable to establish that it had assessed the AML controls of those banks;
  • Failing to undertake annual reviews of the information that it held in relation to the overseas banks that it had relationships with;
  • Failing to establish appropriate policies and procedures for its staff and;
  • Failing to provide its staff with adequate training on how to appropriately scrutinise transactions.

Ghana International Bank plc accepted the FCA's findings and settled at the earliest opportunity thereby qualifying for a 30% discount on the fine that the FCA sought to impose. Without the 30% discount the £5,829,900 fine would have totalled £8,328,500. Ghana International Bank plc also voluntarily agreed that it would not take on any new customers, a restriction which remains in place.

The FCA clearly has systems and controls in its crosshair as the above two fines are by no means isolated cases. Towards the end of 2021 the FCA imposed a number of fines against businesses for poor financial crime controls. It fined Credit Suisse £147,190,276 for serious financial crime due diligence failures and fined HSBC £63.9 million for deficient transaction monitoring controls. Most notably the FCA carried out its first criminal prosecution under the Money Laundering Regulations 2007 against NatWest which resulted in the bank being fined £265m.

This series of enforcement action demonstrates a clear trend at the FCA and shows just how seriously the FCA is taking failures that are discovered in the financial crime controls. Failures to effectively manage a firm's systems and controls creates a risk that money will flow into the pockets of corrupt officials and, as demonstrated by the Ghana International Bank plc fine, is the driver for the FCA to maintain its focus on due diligence and ongoing anti-corruption and money laundering systems.

The FCA does not have to discover actual wrongdoing before it will take action and this means that businesses must scrutinise their internal policies, procedures and controls to ensure that they are fit for purpose. Those that fail to do so may find themselves the subject of an FCA inquiry which could have serious financial and reputational consequences.

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