Why NatWest Was Held Guilty by FCA

Highlights

  • NatWest Group’s subsidiary pleaded guilty to three anti-money-laundering charges.
  • A potential fine of approximately £340 million will be applicable on NatWest under sentencing guidelines.
  • UK’s FCA has assured that NatWest will not be striped of any of its banking licences.

A subsidiary of the major British retail and commercial bank, NatWest Group plc (LON: NWG), has pleaded guilty to anti-money-laundering charges on Thursday for violation of certain regulations that needed to be abided by all financial institutions to maintain sufficient anti-money-laundering systems and controls. The bank failed to avert the laundering of around £400 million ($544 million).

According to the UK’s Financial Conduct Authority (FCA), the guilty plea by NatWest is the first criminal prosecution under money-laundering regulations that have been in place since 2007. The company is all set to face a heavy fine after becoming the first British bank to admit to such a criminal offence.

The FTSE100-listed bank, which is 55% taxpayer owned and received a £45 billion and state bailout during the financial crisis, has pleaded guilty to three criminal charges related to insufficient regulation of customer accounts from 2012 to 2016.

Allegedly around £365 million was deposited by a client in its account for over 5 years, including a cash deposit of £264 million, but the bank didn’t keep a check on suspect activity as per FCA. However, the FCA said that no action would be taken against any current or former NatWest employees. Meanwhile, NatWest said that it wasn’t expecting any authority other than the FCA to inquire into this conduct.

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The FCA bought the charges to Westminster Magistrates' Court, and Clare Montgomery, a lawyer for the FCA, prosecuted the case and told the court that NatWest can face a potential fine of approximately £340 million under sentencing guidelines. By the end of the year, the exact level of fine will be set by a judge.  

The NatWest news has signalled the entire banking industry to strengthen their anti-money laundering systems and controls according to a white-collar crime lawyer at Sidley, Sara George. NatWest, which is the biggest business bank in the UK, has taken responsibility for the offence and has acknowledged that it felt apologetic for its failings.

Alison Rose, CEO of NatWest, expressed deep regret for being unable to avert the laundering of money by one of its own customers. A provision will be created by the bank in anticipation of a penalty next month in its third quarter results. The bank said that £700 million had been invested by it in money laundering prevention systems over 5 years.

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Compliance or facing court

Most likely around 7 December, a final hearing is expected to take place at a higher Crown Court. This is the first criminal action being taken against a bank under the 2007 money laundering law. The FCA had announced it first in March and since then a big blow has been faced by the bank’s drive to rehabilitate its image and get over last year’s scandal of the Royal Bank of Scotland banner.

In the UK, prosecution of a bank for criminal offences is very uncommon, and the bank may not be able to conduct its operations if it is convicted, which isn’t the case in any civil action. Nevertheless, this possibility has been limited as the FCA has ensured that the bank will not be striped of any of its banking licences.

According to the deputy head of complex crime at Reeds Solicitor, Neil Williams, the FCA has given a clear message that non-compliance will lead to the bank facing court, and thus the compliance departments must follow the regulations accordingly.

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