The UK’s Financial Conduct Authority (FCA) said on Monday afternoon that National Westminster Bank Plc (NatWest) has been fined £264.8 million following convictions for three offences of failing to comply with money laundering regulations.
The case related to £365 million deposited into the account of Bradford jeweler Fowler Oldfield between 2012 and 2016.
Fowler Oldfield was shut down following a police raid in 2016.
The FCA said “red flags” that were reported included “significant amounts of Scottish bank notes deposited throughout England, deposits of notes carrying a prominent musty smell, and individuals acting suspiciously when depositing cash in NatWest branches.”
NatWest said in October it pleaded guilty to three offences of money laundering between 2012 and 2016 “in relation to the accounts of a UK incorporated customer.”
NatWest said the FCA has confirmed that “provided no further evidence comes to light, it will not take action against any individual current or former employee of NatWest in respect of this case.”
Mrs Justice Cockerill, the sentencing judge at Southwark Crown Court, said on Monday: “… it must be borne in mind that although in no way complicit in the money laundering which took place, the bank was functionally vital.
“Without the bank – and without the bank’s failures – the money could not be effectively laundered.”
NatWest pleaded guilty at Westminster Magistrates Court on October 7.
This is the first time the FCA has pursued criminal charges for money laundering failings.
“The charges covered NatWest’s failure to properly monitor the activity of a commercial customer, Fowler Oldfield, a jewellery business based in Bradford, between 8 November 2012 to 23 June 2016,” said the FCA.
“When taking on the customer, NatWest initially understood it would not handle cash from the Fowler Oldfield business.
“However, over the course of the customer relationship approximately £365m was deposited with the bank, of which around £264m was in cash.
“Some of the bank’s employees, who were responsible for handling these cash deposits, reported their suspicions to bank staff responsible for investigating suspected money laundering, however no appropriate action was ever taken.
“The ‘red flags’ that were reported included significant amounts of Scottish bank notes deposited throughout England, deposits of notes carrying a prominent musty smell, and individuals acting suspiciously when depositing cash in NatWest branches.
“In addition, the bank’s automated transaction monitoring system incorrectly recognised some cash deposits as cheque deposits.
“As cheques carry a lower money laundering risk than cash, this was a significant gap in the bank’s monitoring of a large number of customers depositing cash, of which Fowler Oldfield was one.
“A separate investigation by West Yorkshire Police has led to 11 people pleading guilty to charges relating to the cash deposits and three cash couriers being charged.
“A further 13 individuals are awaiting trial at Leeds Crown Court on 25 April 2022 in relation to the activities of Fowler Oldfield.”
Mark Steward, Executive Director of Enforcement and Market Oversight at the FCA, said: “NatWest is responsible for a catalogue of failures in the way it monitored and scrutinised transactions that were self-evidently suspicious.
“Combined with serious systems failures, like the treatment of cash deposits as cheques, these failures created an open door for money laundering.
“Anti-money laundering controls are a vital part of the fight against serious crime, like drug trafficking, and such failures are intolerable ones that let down the whole community, which, in this case, justified the FCA’s first criminal prosecution under the Money Laundering Regulations.”
In a stock exchange statement later on Monday, NatWest said: “National Westminster Bank Plc has today been fined £264.8 million at a hearing at Southwark Crown Court for three offences under regulation 45(1) of the Money Laundering Regulations 2007, admitted on 7 October 2021.
“The offences related to operational weaknesses between 2012 and 2016, which meant that NatWest did not adequately monitor the accounts of a UK incorporated customer.
“The fine, which includes a 33% discount for the bank’s early guilty plea will be met from existing provisions, with a small additional provision to be taken in NatWest’s Q4 2021 financial accounts.
“Today’s hearing brings an end to the case against NatWest and the FCA has confirmed that, provided no further evidence comes to light, it will not take action against any individual current or former employee of NatWest in respect of this case.
“NatWest is not aware of, and is not anticipating, any other authority investigating its conduct in this matter.”
NatWest CEO Alison Rose said: “NatWest takes its responsibility to prevent and detect financial crime extremely seriously.
“We deeply regret that we failed to adequately monitor one of our customers between 2012 and 2016 for the purpose of preventing money laundering.
“While today’s hearing brings an end to this case, we will continue to invest significant resources in the ongoing fight against financial crime.”