FSA fines firm and its MLRO for inadequate anti-money laundering systems and controls – On 5 May 2010, the FSA published the Final Notices it has issued to Alpari (UK) Ltd (Alpari), an online provider of foreign exchange services for speculative trading, and Sudiptu Chattopadhyay, Alpari’s former money laundering reporting officer (MLRO).

http://www.fsa.gov.uk/pubs/final/alpari.pdf

http://www.fsa.gov.uk/pubs/final/chattopadhyay.pdf

Alpari has been fined £140,000 for breach of Principle 3 of the FSA’s Principles for Businesses (PRIN) by failing to have adequate anti-money laundering systems and controls in place. As Alpari’s MLRO, Mr Chattopadhyay was accountable for the firm’s failings and has been fined £14,000 for breach of Principle 7 of the FSA’s Statements of Principle and Code of Practice for Approved Persons (APER).

He has also given an undertaking to the FSA that he will not make an application for approval for a compliance oversight (CF10) or MLRO (CF11) role for three years. Both Alpari and Mr Chattopadhyay qualified for a 30% discount as they co-operated fully with the FSA and agreed to settle at an early stage in the investigation. The FSA also recognised that remedial action had been put in place to address the failings identified.

The FSA found that, between September 2006 and November 2008, Alpari failed to carry out a thorough assessment of the money laundering and financial crime risks it was exposed to. As a result, Alpari was at risk of being used for the purposes of financial crime. It also failed to:

1. Carry out satisfactory customer due diligence checks at the account opening stage.
2. Carry out adequate ongoing monitoring of its business relationships with customers.
3. Have in place adequate systems for screening customers against UK and international sanctions lists.
4. Having in place adequate systems for determining whether customers were politically exposed persons (PEPs).
5. Adequately train employees on an ongoing basis in relation to financial crime and money laundering.
6. Expand its compliance and anti-money laundering function in line with the increase in its customer base, from 400 in mid 2007 to 11,500 in mid 2008, placing too much responsibility on Mr Chattopadhyay.

The FSA considers that these failings were particularly serious as Alpari did not operate with customers on a face-to-face basis, and had customers from higher risk jurisdictions, including Nigeria. Further, the FSA has repeatedly stressed the importance of effective anti-money laundering controls through its Financial Crime Newsletters, speeches and other communications, and has also taken enforcement action for such failings previously.

In a press release published alongside the Final Notices, Margaret Cole, FSA Director of Enforcement and Financial Crime, said:

• “The FSA expects firms to assess the financial crime risks to which they are exposed properly. The FSA also expects expanding businesses to commit sufficient resources to their compliance and anti-money laundering functions… These penalties serve as a reminder of the importance of maintaining effective anti-money laundering controls – something we have repeatedly stressed. All firms should ensure that they minimise the risk of exposure to financial crime and we will continue to be extremely vigilant in this area”.

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