The Financial Conduct Authority (FCA) has fined Commerzbank (London branch) just over £37.8m ($47.4m, €42.2m) for failing to put adequate AML systems and controls in place between October 2012 and September 2017.
Commerzbank London, which offers private banking services, was “aware of these weaknesses and failed to take reasonable and effective steps to fix them”, despite the FCA raising specific concerns about them in 2012, 2015 and 2017.
The UK regulator said that these weaknesses also “persisted during a period when the FCA was publishing guidance on steps firms could take to reduce financial crime risk, as well as taking enforcement action against a number of firms in relation to AML controls”.
Mark Steward, FCA executive director of enforcement and market oversight, said: “Commerzbank London’s failings over several years created a significant risk that financial and other crime might be undetected.
“Firms should recognise that AML controls are vitally important to the integrity of the UK financial system.”
Details
The FCA’s investigation identified failings in a number of areas.
The bank failed to conduct “timely periodic due diligence” on its clients, which resulted in a “significant number of existing clients not being subject to timely know-your-client checks”.
By 1 March 2017, 1,772 clients were overdue updated due diligence checks.
A number of the clients were able to continue with the bank’s London branch due to the implementation of an exceptions process, which was “not adequately controlled or overseen and which became out of control by the end of 2016”, the FCA said.
High risk clients
Commerzbank also failed to address “long-standing weaknesses in its automated tool for monitoring money laundering risk on transactions for clients”.
In 2015, Commerzbank London identified that 40 high-risk countries were missing, and 1,110 high-risk clients had not been added, to the transaction monitoring tool.
It also did not have adequate policies and procedures in place when undertaking customer due diligence on clients.
The bank breached Principle 3 of the FCA’s Principles for Businesses, which requires firms to have adequate risk management systems in place.
Remediation
Commerzbank London has undertaken a remediation exercise to bring its AML controls into compliance.
A skilled person has been testing the effectiveness of these enhancements, and their work is now complete.
The bank has also conducted a look-back exercise to identify suspicious transactions during the period in question.
Commerzbank London also voluntarily implemented several business restrictions, which included temporarily not onboarding new high-risk customers and suspending all new trade finance business activities.
It agreed to resolve the matter at an early stage of the investigation and therefore qualified for a 30% discount.
Without the discount, the financial penalty would have been £54,007,800.
