The Financial Conduct Authority (FCA) recently announced an investigation into NatWest Bank’s alleged failure to comply with money laundering regulations.
The case concerns a number of high value deposits into customer bank accounts amounting to £365 million. The FCA alleges that NatWest failed to adequately monitor and scrutinise this potentially criminal activity between 2011 and 2016.
The case has sparked interest because it is the first FCA prosecution against a bank under the Money Laundering Regulations 2007.
Of course, while this case is particularly high profile, it is not just major high street banks that must comply with money laundering laws and regulations.
Here we take a look at how and when a company may be prosecuted for failure to take steps to prevent money laundering.
What types of business do anti-money laundering laws and regulations apply to?
Specific types of businesses are covered by the money laundering regulations, including accountants, estate agents, solicitors and financial service businesses.
If your business is covered by the regulations, you should be monitored by a supervisory authority. Some types of businesses are already monitored because they are authorised to carry out their business practices by a regulatory body, such as the FCA.
Other types of businesses must register with HMRC for supervision. Failure to register for supervision can result in a fine or prosecution.
What anti-money laundering duties do businesses have?
Businesses covered by the regulations have day-to-day responsibilities to carry out ‘customer due diligence’, i.e. to check that their customers are who they say they are and that their activities are legitimate. This requires businesses to put in place internal controls and monitoring processes. These controls include:
- Appointing a ‘nominated officer’ to be aware of any suspicious activity
- Making sure employees know who to report suspicious activity to
- Training employees on their anti-money laundering responsibilities
- Keeping records
- Keeping processes and controls up-to-date
Supervisory authorities and other authorities such as the Crown Prosecution Service or Serious Fraud Office may investigate and prosecute businesses for breach of the money laundering regulations or for breach of other anti-money laundering laws, such as the Proceeds of Crime Act (2002).
What are the penalties for breach of anti-money laundering laws and regulations?
The most likely consequence is a financial penalty which will depend on a number of factors, such as:
- The reasons for non-compliance
- The seriousness of the offence
- The business’s history of compliance
- The size of the business
- Any benefits the business received
- The amount of money involved
The penalty may also be reduced if mitigating factors apply, such as if the business immediately disclosed the breach to the supervisory authority.
Depending on the circumstances and supervisory authority involved, there may be other penalties. For example, HMRC applies a separate penalty administration for the costs of issuing penalties to businesses that do not comply with money laundering regulations.
In the most serious cases, the supervisory authority will consider criminal prosecution. The primary offences for money laundering can be found under the Proceeds of Crime Act (PoCA) and the Terrorism Act 2000 (in relation to terrorist financing).
Organisations facing prosecution are usually able to make a Deferred Prosecution Agreement (DPA) which allows prosecution to be suspended so long as certain conditions are met.
It is important to seek immediate legal advice if your business is facing investigation and prosecution, including to negotiate the terms of a DPA.
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