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What has happened?

Top credit institutions are at it again but the FCA is on to them. NatWest and Credit Suisse have been breaching regulatory requirements and breaking the law, without due consideration of the impact this would have on the financial industry and more importantly on consumers.

NatWest plc

On 7^th October 2021, National Westminster Bank Plc entered guilty pleas at Westminster Magistrates’ Court to criminal charges brought by the FCA under the Money Laundering Regulations 2007 (MLR 2007). NatWest accepts that it failed to comply with regulation 8(1) between 7 November 2013 until 23 June 2016; and regulations 8(3) and 14(1) between 8 November 2012 until 23 June 2016 under MLR 2007 in relation to the accounts of its UK incorporated customer, Bradford-based jeweller Fowler Oldfield.

When Fowler Oldfield was taken on as a client by NatWest, its predicted turnover was £15m per annum. However, it deposited £365m over the space of almost five years, with around £264m in cash. At its height, Fowler Oldfield reportedly deposited up to £1.8m a day. This is the first criminal prosecution under the MLR 2007 by the FCA. No individuals are being charged as part of these proceedings.

Credit Suisse

In October 2021, the FCA fined Credit Suisse over £147 million for serious financial crime due diligence failings related to loans worth over $1.3 billion which the bank arranged for the Republic of Mozambique. These loans, and a bond exchange, were tainted by corruption. Credit Suisse also agreed with the FCA to forgive US$200 million of debt owed by Mozambique as a result of these tainted loans.

Between October 2012 and March 2016, Credit Suisse failed to properly manage the risk of financial crime within its emerging markets business. Credit Suisse was aware that Mozambique was a jurisdiction where the risk of corruption of government officials was high and that the projects were not subject to public scrutiny or formal procurement processes.

The contractor secretly paid significant kickbacks, estimated at over US$50 million, to members of Credit Suisse’s deal team, including two Managing Directors. This was in the pursuit to secure loans at more favourable terms. While those Credit Suisse employees took steps to deliberately conceal the kickbacks and the warning signs of potential corruption, it should have been clear to Credit Suisse’s control functions and senior committees what was happening. There were insufficient challenges within Credit Suisse, or scrutiny and inquiry in the face of important risk factors and warnings. Mozambique has subsequently claimed that the minimum total of bribes paid in respect of the two loans is around US$137 million.

Read our Credit Suisse update 

Pandora

The Pandora Papers is a 2021 leak of almost 12 million documents, published in October 2021, that reveals hidden wealth, tax avoidance and, in some cases, money laundering by some of the world’s rich and powerful. The data was obtained by the International Consortium of Investigative Journalists in Washington DC, which has been working with more than 140 media organisations on its biggest ever global investigation.

Details revealed so far include:

• the owners of more than 1,500 UK properties bought using offshore firms, including individuals accused of corruption,
• the Qatari ruling family who avoided £18.5m tax on a London super-mansion,
• the prominent Tory donor who was involved in one of Europe’s biggest corruption scandals,
• the King of Jordan’s £70m spending spree on properties in the UK and US through secretly-owned companies,
• Azerbaijan’s leading family’s hidden involvement in property deals in the UK worth more than £400m,
• the Czech prime minister’s failure to declare an offshore investment companyused to purchase two French villas for £12m, and
• how the family of Kenyan president Uhuru Kenyatta secretly owned a network of offshore companies for decades.

REP-CRIM Reporting data

Since 2017, the FCA has been requesting firms to provide an annual Financial Crime Data return, known as the REP-CRIM. This report is to be completed by banks, mortgage lenders, building societies and other firm types that fall into the scope identified within the FCA’s Handbook (SUP 16.23). In 2020, the FCA consulted on increasing this scope from 2,500 to 7,000 firms; these included FSMA authorised firms falling within the scope of the MLRs which either hold client money or assets or carry out activity that pose a higher money laundering risk. All payment institutions are now captured within the FIN-CRIM return with the exception of firms that only hold the permission to carry out money remittance or account information or payment initiation activity, Electronic Money Institutions, Multilateral Trading Facilities (MTFs), Organised Trading Facilities (OTFs) and cryptoasset exchange providers and custodian wallet providers.

Over the past three years, the FCA has been collating this data to complement its risk-based financial crime supervision business plan for 2021/2022. The statistics show the changes, varied approaches and attitudes firms are taking to demonstrate their commitment to meeting their regulatory obligations as set out in the Money Laundering Regulations 2017 (MLRs).

Find a breakdown of the results in our REP – CRIM data results blog: REP-CRIM data results: the good, the bad and the ugly. By Nadia Lemard, Payment Services & Financial Crime Manager

How can we help you?

If you’d like to know more about how we can help you with your financial crime arrangements, or with any other regulatory compliance issues, our expert team is here to help. Contact us today on 0207 436 0630 – or email info@thistleinitiatives.co.uk.