Northern Bank Limited

FCA action

fine

1

in fines

£1.25m

most recent

August 2003

• Fined £1.25m on 4 August 2003

  Final Notice Issued on 4 August 2003 on Northern Bank Ltd. 1. THE PENALTY 1.1 On 4 August 2003 the FSA imposed a financial penalty on Northern Bank of £1,250,000 in respect of breaches of Rule 3.1.3 of the FSA's Money Laundering Sourcebook (ML). 2. REASONS FOR THE PROPOSED ACTION 2.1. Between March and July 2001 (i.e. before ML came into effect on 1 December 2001) Northern Bank conducted a large-scale review of compliance with its account opening procedures. The review identified high rates of non-compliance with Northern Bank's own client identification requirements. 2.2. In January and February 2002 (i.e. after ML came into effect) a further review of anti-money laundering compliance identified continuing high rates of non-compliance with client identification requirements. Despite this, the report of the review concluded that the overall standard of money laundering compliance was satisfactory although noting that weaknesses existed which required attention. 2.3. Following the January 2002 review Northern Bank did not put in place a detailed improvement plan specifically aimed at increasing compliance rates in respect of client identification. There was no specific follow-up testing of branches that had performed particularly poorly. 2.4. In April 2002 the FSA asked Northern Bank about its anti-money laundering compliance rates. Northern Bank provided the FSA with the non-compliance rates identified by its 2001 review but, due to its failure to recognise the seriousness of the non-compliance rates identified by its January 2002 review, did not provide the detailed results of that review to the FSA until October 2002. 2.5. In September 2002 a further internal review of compliance with client identification requirements identified that, while the overall rate of non-compliance had declined somewhat from the rates detected in the January 2002 review, it was still at an unacceptably high level. Following the September review and in light of the FSA's concern regarding its non-compliance rates, Northern Bank drew up and implemented a comprehensive remedial action plan. 2.6. A further internal review in early 2003 indicated that, as a result of the remedial action, non-compliance rates had fallen to low single figures. 2.7. The FSA investigation reviewed the accounts tested by Northern Bank in its January and September 2002 reviews. Each account file was examined, having regard to the identification criteria set out in the Guidance Notes, to determine whether there was sufficient evidence to show that the client was who he had claimed to be. 2.8. The FSA investigation showed that in 35% of the accounts included in the January 2002 review and 18% of the accounts included in the September 2002 review Northern Bank had failed adequately to verify that the client was who he had claimed to be. Northern Bank therefore breached ML 3.1.3 in respect of those accounts. 3. FACTORS RELEVANT TO DETERMINING THE SANCTION The seriousness of the breaches 3.1. The high level of breaches identified applied across the whole of Northern Bank's branch network and existed for a considerable period of time. 3.2. The non-compliance rates identified in the January and September 2002 reviews for non-personal accounts were particularly high. The Guidance Notes state that corporate entities are amongst the most likely vehicles for money laundering. The FSA notes, however, that in most cases at least some attempt had been made to identify both personal and non-personal customers. 3.3. The seriousness of the breaches is exacerbated by the fact that they took place against a background of increased regulatory emphasis on the importance of effective anti-money laundering controls and Northern Bank's own earlier testing in 2001 having already revealed high rates of non-compliance with its own client identification requirements. 3.4. The FSA has considered whether the risk arising from organised crime in Northern Ireland should be afactor relevant to determining the penalty. It has decided that it would not be appropriate to penalise Northern Bank on the basis of its location and therefore this has not been a factor in determining the size of the penalty. ML applies with equal force throughout the United Kingdom. The size, financial resources and other circumstances of the firm 3.5. The size of Northern Bank in the retail banking market in which it operates means that its failure to have strong and effective procedures for the identification of its clients, as part of its anti-money laundering systems and controls, presented a serious risk to the FSA's statutory objective to reduce financial crime. Conduct following the contravention 3.6. The FSA considers Northern Bank's failure between January and September 2002 to produce an effective strategy to deal with its high rate of non-compliance with the requirements of the Money Laundering Regulations 1993 and the FSA Money Laundering Rules to be a particularly serious matter. Although the non-compliance rate declined in the period between January and September 2002, the absence of a strategy after the January review resulted in the non-compliance rate continuing at unacceptably high levels. 3.7. Due to its failure to recognize the seriousness of the non-compliance rates revealed by its January 2002 review, Northern Bank did not inform the FSA of them until after the FSA made specific enquiries later that year. 3.8. The FSA notes, however, that after September 2002 Northern Bank devoted considerable resources to correct the problem and implemented a comprehensive remedial action plan. The FSA is satisfied that the remedial action plan has appropriately addressed the problem. Furthermore, the FSA notes that during its remedial action Northern Bank re-examined the accounts that had not been properly opened and found no evidence that actual money laundering had taken place. 3.9. Northern Bank has co-operated fully with the FSA's investigation and, by moving quickly to agree the facts of the case and to settle the matter, has helped the FSA to work expeditiously towards its regulatory objectives, which include reducing financial crime. Previous action taken by the FSA 3.10. In a Final Notice dated 12 December 2002 the FSA imposed a financial penalty of £750,000 on Royal Bank of Scotland plc (RBS) for breaches of ML 3.1.3 and ML 7.3.2. The FSA noted at the time that, were it not for the prompt and effective remedial action taken by RBS once it had identified its failings and for the full and pro-active co-operation demonstrated by RBS in relation to the FSA's investigation, the financial penalty imposed would have been very substantially higher. The present case is distinguished particularly by Northern Bank's failure to recognise the seriousness of its breaches and its consequent failure to take prompt and effective remedial action after they were identified in January 2002 and for some nine months after that. 4. CONCLUSION 4.1. Taking into account the seriousness of the breaches and in particular the lack of urgency with which Northern Bank dealt with the matter after January 2002 and the risks that posed to the FSA's regulatory objective of reducing financial crime, the FSA has decided to impose on Northern Bank a financial penalty of £1,250,000. 4.2. Without the effective remedial steps taken by Northern Bank after September 2002, the co-operation afforded to the investigation and the early settlement of the case, the penalty would have been very substantially higher. 4.3. The full text of the Final Notice is available from the FSA.

Ombudsman complaints

new complaints, January–June 2025

43

upheld, against a 31% median

33%

about banking and credit

39

A bigger firm gets more complaints simply because it has more customers. With this few, one case moves the upheld rate a lot.

Customer compensation schemes

The FCA has ordered this firm to review past sales and pay back customers who lost out.

• January 2015 To address possible selling issues affecting customers who purchased Card Security Products provided by Affinion International Limited, where the sale (or renewal) of such products was on or after 14 January 2005 and…