The Financial Conduct Authority has launched criminal proceedings against NatWest for failing to comply with anti-money laundering rules, in the first attempted prosecution against a UK bank under the law.
The FCA alleged that NatWest “failed to adequately monitor and scrutinise” the actions of a UK-incorporated customer that paid £365m into its account in a series of increasingly large cash deposits between 2011 and 2016.
The customer operated a money service business — a firm that transmits money, cashes cheques or operates a bureau de change — according to NatWest’s annual report.
The FCA launched an investigation into potential failures by NatWest in 2017. NatWest said it had co-operated with the investigation.
The bank said it “takes extremely seriously its responsibility to seek to prevent money laundering by third parties and has accordingly made significant, multiyear investments in its financial crime systems and controls”.
Criminal money-laundering cases carry an unlimited fine that the court can impose.
“This is potentially very serious, and not just because there is an unlimited fine,” said Jonathan Fisher QC, who specialises in money-laundering cases. “It will send shivers of concern down the spines of those operating in the regulated sector whose anti-money-laundering procedures are not 100 per cent.”
Although the ultimate sanction for NatWest — a fine — is the same outcome as a civil penalty, criminal cases carry particular consequences, Fisher explained. A conviction carries with it questions over whether a bank’s regulatory licences will be renewed, and whether it can still bid in public tenders.
The FCA has long pledged to use its criminal money-laundering powers, but until now with nothing to show for it. The watchdog inherited the powers with which it charged NatWest in 2007, but this is the first time it has used them.
It emerged that in September that the FCA had scrapped seven of its 14 criminal probes into money laundering. In 2018 it downgraded a criminal probe into Credit Suisse and $2bn worth of so-called tuna bonds in Mozambique into a regulatory investigation.
No individual is facing criminal charges in the NatWest case but the rules allow for a maximum two-year sentence for individuals.
NatWest is scheduled to appear in court next month.
In addition to the specific investigation that began in 2017, the FCA in 2019 separately appointed an external expert to review NatWest’s broader financial crime governance arrangements. The review is ongoing.