Alastair Lauder, Head of Transformation, P2 FinCrime

It was announced yesterday that NatWest had been fined £265m after pleading guilty of money laundering failings – the first criminal prosecution of a UK lender by the Financial Conduct Authority (FCA). This is a strong indicator of the direction the FCA is taking, and demonstrates why other financial institutions should be looking internally to ensure they don’t have similar issues.

This case highlighted the following:

• It was not a system issue – the FC systems did their job with 11 money laundering reports and 10 automated transaction monitoring alerts
• NatWest failed to properly investigate numerous warnings generated by its FC systems, appeared to be more focussed on clearing alerts within a 30-day time period v. doing in-depth research and investigation into the alerts
• NatWest miscategorised the customer as lower risk
• Staff investigating the warnings lacked sufficient experience and knowledge
• The relationship manager responsible got so close to the client that he lost all sense of perspective and judgement and was completely taken in, resulting in his dismissal from Natwest
• SAR was raised on one of the jeweller’s customers (a company involved in hair extensions) relating to a payment from the jewellers to them for £307,000
• No SARs were filed with the FCA

SARs process and quality are at fault here

In addition to staff not having sufficient knowledge and training, SARs process and quality are also at fault here. This case highlights the fact that Financial Institutions focus too much on the automated element of the process –  is the system working, does it need to be tuned, is the data good – often overlooking providing specific training for staff outside of the annual regular reading and viewing. Recognition should be given to certain roles that require specific enhanced training. Such front-line staff require more support and guidance on what to do, how to ask relevant investigative questions without tipping off and how to gather supportive information to submit a high quality, informative SAR that supports a more informed decision. Back-office staff need to be looking at the quality of the SARs and providing feedback so that they can be improved for future submissions.

If you would like to speak to P2 FinCrime about fixing your financial crime data, please email me at alastair.lauder@p2consulting.com or call +44 (0) 7425 160 549.