NatWest Fined £265 Million After Money Laundering Guilty Plea
NatWest Fined £265 Million After Money Laundering Guilty Plea
(Bloomberg) -- NatWest Group Plc was fined 265 million pounds ($351 million) at a sentencing hearing after pleading guilty to failing to prevent money laundering in a case that heard details of hundreds of thousands of pounds being couriered in black garbage bags and branch vaults overflowing with bank notes.
The bank admitted to three criminal charges in October, accepting that it failed to prevent money laundering at an English gold dealer. NatWest took in some 365 million pounds in deposits, more than two-thirds of which was in cash, across some 50 branches. The deposits piled up despite the gold dealer forecasting an annual revenue of just 15 million pounds per year.
The case was prosecuted by the U.K.’s financial watchdog, the Financial Conduct Authority, which laid out a series of lapses at local branches as well as repeated failures of overall reporting and oversight. One manager at a cash processing center warned a financial crime investigator that the volume of deposits was the most suspicious that he had encountered in his entire career. NatWest kept taking in money until police finally took over the account in 2016.
“Without the bank -- and without the bank’s failures -- the money could not be effectively laundered,” Judge Sara Cockerill said. She imposed a fine that was 15% higher than the 340 million pounds initially sought by the FCA -- partly as a deterrent effect -- although she reduced the total by a third because of the bank’s guilty plea.
“Despite the bank’s commitment to improvement and regret it is incumbent on the court to pass a sentence which is of sufficient size that it will be felt by management and shareholders of the bank,” she said.
NatWest said in a statement that the cost of the fine will be met from existing provisions, with a small additional provision to be taken in NatWest’s fourth quarter.
“We deeply regret that we failed to adequately monitor one of our customers between 2012 and 2016 for the purpose of preventing money laundering,” Chief Executive Officer Alison Rose said in the statement. Rose and Chairman Howard Davies sent a letter to the judge apologizing for the bank’s actions.
The gold dealer was shut down after a police investigation in 2016 into what was alleged to be “an extremely sophisticated” money laundering operation.
The bank had agreed it wouldn’t handle any cash deposits when it opened the account. But at the height of the activity, the dealer was depositing up to 1.8 million pounds per day with the local branch, Clare Montgomery, a lawyer for the FCA, said.
“NatWest is responsible for a catalog of failures in the way it monitored and scrutinized transactions that were self-evidently suspicious,” Mark Steward, executive director of Enforcement and Market Oversight at the FCA, said. “Combined with serious systems failures, like the treatment of cash deposits as checks, these failures created an open door for money laundering.”
Black Binliners
The account was the single most “lucrative” for the corporate banking office in the Bradford area in northern England, Montgomery told the judge. At one branch, she said, around 700,000 pounds in cash was loaded into black binliners and walked through a shopping center. The notes were so heavy that the bags almost split, she said.
The vaults were so full that some bags of cash had to be stored outside, she said.
John Kelsey-Fry, a lawyer for NatWest, said that bank staff didn’t miss the suspicious activity.
“It did not go under the radar. It was identified and subjected to scrutiny,” Kelsey-Fry said. “The quality and adequacy of that scrutiny is another matter.”
On another occasion, bank staff at a cash processing center noted a heavy volume of Scottish bank notes, that the police suspected may have come from drug trafficking. NatWest refused to provide further information in response to the police request.
The case is the FCA’s first criminal prosecution under 2007 money laundering rules and the first prosecution against a bank, part of a concerted effort by the regulator to act more forcefully.
“Whatever else may happen, the bank must bear the stigma of that,” Kelsey-Fry said.
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