Barclays Fined £42 Million for Anti-Money Laundering Failures

The United Kingdom's Financial Conduct Authority (FCA) has imposed a £42 million penalty on Barclays Bank for shortcomings in its anti-money-laundering (AML) systems and controls. The bank failed to gather adequate customer information, neglected to conduct effective ongoing monitoring, and ignored clear red flags, even after receiving law-enforcement warnings and witnessing police raids. The fine serves as a warning to South African financial service providers and institutions that regulators expect robust and effective AML frameworks, and will impose significant penalties where required standards are not met.

Key Takeaways:

• The FCA found that Barclays failed to gather adequate customer information and neglected to conduct effective ongoing monitoring, despite receiving law-enforcement warnings and witnessing police raids.
• The bank continued to transact with its precious metals customer after law enforcement alerts and police raids, demonstrating a failure to take decisive action in the face of warning signs.
• Barclays did not consult the Financial Services Register to confirm that its new client, WealthTek, was authorised to hold client money, placing millions of pounds at risk and contributing to the penalty.
• The FCA emphasized that effective AML compliance is a board-level responsibility, and that senior managers must be able to demonstrate active oversight.
• The Barclays investigation illustrates the value of early cooperation and remediation, with the fine being reduced materially in recognition of the bank's voluntary payment to affected clients and its extensive cooperation with the FCA.
• South African institutions should cultivate a culture of transparency with regulators, engaging proactively if weaknesses are identified and offering remedial action, both financial and operational, before enforcement commences.
• A robust compliance culture, supported by continual investment in technology and staff training, is integral to safeguarding the integrity of the financial system.
• The FCA's key action points for institutions in light of the Barclays decision include reviewing AML frameworks and focusing on six priority areas: enhancing customer due diligence and ongoing monitoring, investing in advanced monitoring technologies, implementing clear escalation protocols, verifying counterparties' regulatory status, ensuring board and senior management level accountability, and engaging with regulatory authorities.

Statistics:

• £42 million: The penalty imposed by the FCA on Barclays Bank.
• 2: The number of unrelated customer matters involving precious metals company Stunt & Co and wealth-management firm WealthTek.
• £millions: The amount of money placed at risk due to Barclays' failure to verify WealthTek's authorization to hold client money.
• 2019: The year the FCA issued Financial Intelligence Centre Guidance Note 7A (GN 7A), which makes it clear that the board of directors, senior management, and other persons in authority are solely responsible for the effectiveness of Risk Management and Compliance Programmes (RMCPs).

Sources:

• The Financial Conduct Authority (FCA)
• Financial Intelligence Centre Guidance Note 7A (GN 7A)
• Mondaq Ltd
• Barclays Bank
• Financial Sector Conduct Authority (FSCA)
• South African Reserve Bank (SARB)