The Financial Conduct Authority (FCA) has fined EFG Private Bank £4.2 million for failing to take reasonable care to establish and maintain effective anti-money laundering controls for high risk customers.
The regulator said the failings were serious and lasted for more than three years.
The Financial Services Authority (FSA) visited the bank in January 2011 as part of a thematic review on how UK banks were managing money laundering risk in higher-risk situations.
The FSA found that EFG had not fully put its anti-money laundering policies into practice.
It said that 17 of 36 reviewed customer files, opened between December 2007 and January 2011, contained customer due diligence that highlighted significant money laundering risks, but insufficient records of how the bank’s senior management had mitigated those risks.
In 13 of the files, the FSA found that the risks highlighted related to allegations of criminal activity or that the client had been charged with criminal offences including corruption and money laundering.
The regulator said that at the end of 2011 around 400 of EFG’s 3,342 customer accounts were deemed by the firm to present a higher risk of money laundering or reputational risk, and of these 94 were held by politically exposed persons.
EFG is the UK subsidiary of the EFGI Group, a global private banking group based in Switzerland, which provides private banking and wealth management services to high-net-worth individuals.
The FCA said it dealt with overseas jurisdictions recognised as presenting a higher risk of money laundering or bribery and corruption.
The FCA outlined one example where the bank’s due diligence highlighted that a prospective client had acquired their wealth through their father, who was allegedly linked to organised crime, money-laundering and murder.
However, there was insufficient information on file to explain how the bank concluded that this risk was acceptable or how it was mitigating the risks.
EFG also failed to appropriately monitor its higher risk accounts.
The regulator concluded that the bank breached FSA Principle 3 ‘requiring it to take reasonable care to organise and control its affairs responsibly and effectively’.
Tracey McDermott, head of enforcement and financial crime, said: ‘One of the FCA’s objectives is to protect and enhance the integrity of the UK financial system. This includes ensuring money in the UK system is clean.
‘Banks are the first line of defence to make sure that proceeds of crime do not find their way into the UK. In this case while EFG’s policies looked good on paper, in practice it manifestly failed to ensure that it was addressing its anti-money laundering risks. Its poor implementation of its agreed policies risked the bank handling the proceeds of crime. These failures merited a strong penalty from the FCA.’