Four years after an £8.75 million fine for ‘serious failings’, Coutts is once again under the spotlight for providing offshore services to controversial clients.
As revealed in the Guardian, the private bank managed secretive tax haven structures for the Sultan of Brunei’s younger brother Prince Jefri Bolkiah,who was accused of stealing billions from his country, as well as investment banker Hassan Heikal.
Heikal was charged with assisting Hosni Mubarak’s sons in financial crime.
They were both clients of Coutts & Co Trustees in Jersey, while their offshore companies were active until the end of 2015 at least, according to the Guardian.
It is legitimate to provide services to such politically exposed individuals (PEPs), who will be subjective extensive checks and due diligence.
In a case when a bank would need to terminate a relationship, this can also take time. Although Coutts did not confirm whether the two remained on its books.
Emails between offshore law firm Mossack Fonseca - uncovered in the Panama Papers - and Coutts show that the law firm thought the two individuals presented high risk.
When it found out about the services offered to Bolkiah, it resigned as agent of two British Virgin Islands (BVI) companies where he was the beneficiary.
Through its trust arm in Jersey, Coutts also managed two BVI companies for Heikal.
Back in October, the bank put up its trust company for sale and a management buy-out was agreed, which is expected to complete before the end of the year.
In response, a Coutts spokesperson told Wealth Manager: ‘We take our responsibilities under anti-money laundering (AML) and anti-corruption regulations extremely seriously and have policies in place to ensure compliance with the regulations in the jurisdictions where we operate.
It added: ‘Our guidelines on working with politically exposed individuals are in line with AML regulations and we take a proactive approach to these issues, which impact all banks.
'We do not open banking relationships with individuals who are subject to international sanctions and where existing clients are subsequently placed on sanctions lists, we exit the relationship or engage proactively with law enforcement where it is not possible to immediately do so.’
Back in 2012 the then Financial Services Authority (FSA) fined Coutts £8.75 million for failing to establish effective anti-money laundering systems and controls relating to high risk clients.
This resulted in an ‘unacceptable risk of the bank handling the proceeds of crime’ the regulator said at the time.
Following the regulator’s warning, the Queen’s bank started implementing a number of improvements including amendments to PEP and other high risk customer files.