The Financial Conduct Authority (FCA) has fined Canara Bank £896k and has imposed a restriction, preventing it from accepting deposits from new customers for 147 days. Financial services firms are required to maintain robust anti-money laundering (AML) systems and controls, since they are at risk from those seeking to launder the proceeds of crime or to finance terrorism. Between 26 November 2012 and 29 January 2016, Canara failed to maintain adequate AML systems and failed to take sufficient steps to remedy identified weaknesses, despite having been notified of shortcomings in its AML systems and controls.
Mark Steward, Executive Director of Enforcement and Market Oversight at the FCA, said:
“Financial crime and money–laundering failures are areas of focussed priority for us. Canara was warned its money laundering controls were inadequate and so its failure to remediate them properly is at the more serious end of the range of sanctions.”
The Final Notice highlights the importance of branches of overseas banks and their senior management having sufficient understanding of their regulatory responsibilities and ensuring those obligations are met with appropriate resources.
Specifically, the FCA found that Canara failed to maintain adequate systems and controls to manage the risk of money laundering. These failures were systemic and affected almost all levels of its business and governance structure including: (1) Senior Management; (2) Governance / Oversight; (3) three Lines of Defence; (4) Money laundering reporting function; and (5) AML systems and controls.
As a result, Canara breached Principle 3 (taking reasonable steps to organise its affairs responsibly and effectively, with adequate risk management systems) of the FCA’s Principles for Businesses.
The FCA has also announced that it will be investigating TSB following recent IT issues when around 1.9 million customers were locked out of their accounts. FCA Chief Executive Andrew Bailey stated “The FCA has been dissatisfied with TSB’s communications with its customers and we have had concerns that TSB was not being open and transparent about the issues experienced. The current communications were perceived as poor, and could reduce trust in TSB and in the banking sector as a whole.” The Treasury Select Committee stated that it had lost confidence in TSB chief executive Paul Pester. In a letter to TSB chairman Richard Meddings, committee chair Nicky Morgan said the bank should consider removing Pester as the head of the bank "as a matter of urgency".