Coutts has been slapped with its biggest ever fine from the UK’s
Financial Services Authority (FSA) for ‘serious, systemic’
shortcomings in its systems on anti-money-laundering (AML) and
money obtained through corruption between 2007 to 2010.

The FSA fined the UK private banking arm of Royal Bank of
Scotland (RBS) £8.75m ($13.85) after a review of its files on
customers who are politically exposed persons (PEPs) and found ‘an
unacceptable risk of Coutts handling the proceeds of crime’.

The latest censure surpasses the £6.3m ($10.2m) fine
Coutts received last year
from the FSA for failing to provide
adequate advice to clients about the risks associated with AIG Life
bonds.

The regulator found 71% of the 103 files examined showed
deficiencies in due diligence when accepting a new customer and/or
the failure to conduct appropriate ongoing monitoring.

 

No evidence of corruption

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By GlobalData

During December 2007 and November 2010, approximately 1% of
Coutts total customer base was classified as high risk. Coutts said
it found no evidence that money laundering took place during the
period.

The UK-based private bank accepted the results of the findings
and has implemented a number of improvements including a
reassessment of its PEPs processes and investment in training.

Rory Tapner, chief executive of RBS’s wealth division, said in a
statement: “We are disappointed that Coutts & Co did not meet
the FSA’s standards with regard to establishing and maintaining
effective AML controls in relation to high risk clients.”

“We remain committed to ensuring that our systems and controls
are robust and counter the risk of financial crime in all the
markets in which we operate,” he added.

 

Specific failings

The FSA said that Coutts failed to gather sufficient information
to establish the source of wealth of its prospective PEP and other
high risk customers and to identify and/or assess adverse
intelligence about high risk customers properly and take
appropriate action.

The bank did not update the information it held on existing
customers properly nor scrutinise transactions made through PEP and
other high risk customer accounts appropriately.

 

Mitigating action

The bank was awarded a 30% discount on the fine due to settling
at an early date.

The FSA also said that Coutts took action to address the
deficiencies once the FSA had raised concerns.

These actions included  engaging a third party consultant
to review and overhaul its AML processes, revise its training
programme for private bankers and review its PEP and other high
risk customer files.

As a result of that review, a number of improvements and
recommendations have already been, or are being, implemented, the
FSA said.

These include significant remedial amendments to the Firm’s PEP
and other high risk customer files to ensure that appropriate due
diligence information about its customers has been assessed and
recorded.

Coutts said it has also exited a number of high risk
customer relationships.

Coutts UK client assets as at 31st December 2011 were
£44.2bn.