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March 26, 2012updated 04 Apr 2017 3:42pm

FSA slaps Coutts with record £8.75m fine

Coutts has been slapped with its biggest ever fine from the UKs 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.

By Thomas McMahon

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

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.

 

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