Santander UK Plc (Santander) is facing a £107,793,300 ($131,992,444) fine after serious anti-money-laundering (AML) failings. The Financial Conduct Authority (FCA) found significant and persistent gaps in the bank’s anti-money-laundering (AML) controls connected to their business banking customers. 

The FCA found that, between December 2012 and October 2017, the bank failed to effectively run and properly oversee its AML systems, which significantly impacted its ability to monitor its business customers.  

The investigation also brought to light the fact that Santander had ineffective systems to adequately assess and verify customer information connected to the nature of their business and their expected deposits. Santander also failed to properly monitor account transactions and the money actually moving through the accounts.

“Santander’s poor management of their anti-money-laundering systems and their inadequate attempts to address the problems created a prolonged and severe risk of money laundering and financial crime,” said Mark Steward, Executive Director of Enforcement and Market Oversight at the FCA. “As part of our commitment to prevent and reduce financial crime, we continue to take action against firms which fail to operate proper anti-money laundering controls.”

Hundreds of millions passed through a single account

In one case, a new customer, purportedly a small translations company, opened a business account with expected monthly deposits of £5,000 ($6,122). Within six months, millions were deposited and then swiftly transferred to different accounts.

Even though account closure was recommended by Santander’s own AML team in March 2014, the account remained open until September 2015, with millions of additional funds flowing through it.

At the request of law enforcement Santander appropriately kept the account open in September 2015, but failed to regularly review it, missing information in June 2016, which would have prompted its closure. The account remained open until the FCA contacted the bank in December 2016, by which time “approximately £269m had passed through it.”  

Red flags not acted on

The FCA identified several other business banking accounts that were not managed correctly, which left the bank vulnerable to helping facilitate serious money laundering. The regulator also found examples where Santander failed to promptly deal with ‘red flags’, like automated monitoring alerts, normally associated with suspicious activity and usually requiring action by the bank.  

These failures led to that more than £298m ($365m) passing through the suspicious accounts before these were finally closed by the bank. 

“Santander’s poor management of their anti-money-laundering systems and their inadequate attempts to address the problems created a prolonged and severe risk of money laundering and financial crime.”

Mark Steward, Executive Director of Enforcement and Market Oversight, the FCA

Santander was aware of the weakness of its AML systems and controls, and started a programme of improvements in 2013. Although the work resulted in some improvement to its AML capabilities, Santander concluded that the changes did not adequately address the underlying weaknesses and, in 2017, embarked on a more comprehensive restructuring of its processes and systems. The bank continues to invest in and work on this area of its compliance operations.

A £154m fine before discount

Santander has decided not to dispute the FCA’s findings and has agreed to settle, which means a 30% reduction of the fine. Without the fine discount, the penalty would have been an eye-watering £153,990,400 ($188,466,832). 

Chief Executive Officer of Santander, Mike Regnier, said: “Santander takes its responsibilities regarding financial crime extremely seriously. We are very sorry for the historical Anti-Money-Laundering (AML) related controls issues in our Business Banking division between 2012-17 highlighted in the FCA’s findings.”

“While we took action to address our AML issues once they were identified, we accept that our AML framework at the time should have been stronger. We have since made significant changes to address this by overhauling our financial crime technology, systems and processes. Today over 4,400 staff are focused on preventing financial crime and we continue to invest to meet our responsibilities and keep our customers and communities safe.”

Santander is not the only bank fined by the FCA for the poor management of AML systems. Other banks fined include Standard Chartered Bank £102.2m ($125.2m), HSBC Bank plc £63.9m ($78.2m), and NatWest £264.8m ($324.2m). The size of the fines is indicative of the severity of the AML issues at these institutions.