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The Actuary The magazine of the Institute & Faculty of Actuaries

FSA fines Coutts £8.75m for anti-laundering failings

Coutts has been fined £8.75m today by the Financial Services Authority for failures in establishing and maintaining effective anti-money laundering systems and controls.


The failings, which relate to high risk customers including politically exposed persons, were ‘serious, systemic and were allowed to persist for almost three years’, the regulator said. They resulted in an ‘unacceptable risk’ of Coutts handling the proceeds of crime, it added.

Coutts, which is owned by the Royal Bank of Scotland, was visIted by the FSA in October 2010 as part of its thematic review into how banks manage high money-laundering risk situations.

Following the visit, the FSA found Coutts did not use robust controls when starting relationships with high-risk customers and did not consistently apply appropriate monitoring of those relationships.

Its anti-money laundering team also failed to provide an appropriate level of scrutiny and challenge.

Deficiencies were found in nearly three-quarters of the PEP and high-risk customer files reviewed, such as a failure to gather enough information to establish the source of wealth and funds of the prospective customers.

Tracey McDermott, the FSA’s acting director of enforcement and financial crime, today labeled Coutts failings ‘significant, widespread and unacceptable’.

Its conduct fell well below the standards we expect and the size of the financial penalty demonstrates how seriously we view its failures,’ she said.

Ms McDermott said the fine should serve as a warning to other firms that they should constantly review and adapt their controls to changing financial crime risks within their businesses.

They should also make changes to reflect changing regulatory or other standards, she added.

The FSA noted that Coutts had either made, or was in the process of making, a number of improvements and changes as a result of its review. The bank had also settled at an early state and therefore had its fine reduced b y 30% from the £12.5m it would otherwise have been.

Responding to today’s announcement, Coutts said it was now ‘confident’ that its processes in relation to AML were now ‘robust’.

Rory Tapner, chief executive of the wealth division of parent company Royal Bank of Scotland, said: ‘We are disappointed that Coutts & Co did not meet the FSA’s standards with regard to establishing and maintaining effective AML controls in relation to high risk clients.

‘Since the FSA first raised its concerns, we have implemented a number of improvements to prevent any recurrence of these failings. Regulatory reforms continue apace. We remain committed to ensuring that our systems and controls are robust and counter the risk of financial crime in all the markets in which we operate.’

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