The Financial Conduct Authority fined EFG Private Bank £4.2 million yesterday for failing to carry out proper due diligence on clients. EFG has an office in Mayfair and is part of Switzerland’s EFG International. The fine is the first levied by the FCA, which took over from the Financial Services Authority last month. EFG is the third bank to be penalised in the UK over money-laundering controls. Coutts, the exclusive private bank owned by Royal Bank of Scotland, was fined £8.75m and Swiss-owned Habib Bank AG Zurich was fined more than £500,000 in 2012.
FCA
The Financial Conduct Authority (FCA) said UK regulators first became seriously concerned about procedures at EFG Private Bank Ltd during a spot check on how UK banks were managing money-laundering risks in January 2011.
During a two-year investigation, the FSA found that the bank had discovered that some clients had been charged with criminal offences including corruption and money laundering or that allegations about wrongdoing had been made about them.
The FCA did not say money laundering and other criminal activity had taken place but that EFG’s controls were not sufficient to ensure it had not.
The bank said: “This is the first time EFG Private Bank has been the subject of disciplinary action. Senior management has co-operated fully with the FCA and remedial action has been taken to ensure that its systems and controls are robust.”
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In one case, “EFG’s due diligence highlighted that a prospective client had acquired their wealth through their father, about whom there were allegations of links with organised crime, money laundering and murder,” the FCA said. “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.”
Seventeen EFG customer files, opened between December 2007 and January 2011, highlighted “significant money-laundering risks” but showed insufficient records of how the bank’s senior management mitigated those risks, the FCA said.
Of those files, 13 related to allegations of criminal activity or showed that the customer had been charged with criminal offences, including corruption and money laundering.
One of EFG’s customers, according to its own due diligence, acquired her wealth through her father, about whom there were allegations of links with organised crime and murder, the FCA said. Yet the bank provided scant information about how it was ensuring that the money was clean or that the risks were acceptable.
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“Banks are the first line of defence to make sure that proceeds of crime do not find their way into the UK,” said Tracey McDermott, head of enforcement and financial crime at the FCA.
“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.”
The bank said it was disappointed that shortcomings had been found between 2007 and 2011, but that it had taken remedial action to ensure its systems and controls were robust. It said the fine would not impact on reported profits this year.
EFG fully co-operated with the investigation, qualifying for a 30% discount on a fine that would otherwise have been set at £6m.
The FCA took over as the new regulator from the now defunct Financial Services Authority at the beginning of this month.
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