Published: 13th June 2012

Following the FSA action taken against Coutts & Company in March for money laundering failings, the FSA has fined a further firm for such issues.

Habib Bank AG Zurich (Habib), a privately owned Swiss bank with branches in the UK, suffered a penalty of £525,000 after the usual 30% discount for agreeing to settle early. As has happened in past cases, the Regulator has not only taken action against the firm but also against a specific individual: Syed Hussain, the MLRO. The most recent example of this was the fine imposed both upon Mitsui for corporate governance failings and upon its Chief Executive for failing to ensure adequate arrangements were in place (see Regulatory Roundup 40).

Mr Hussain was fined £17,500, again after a 30% discount, for his failings as MLRO. The action takes into account that Mr Hussain has now retired from working in the financial services industry. The situation brings to mind what Tracey McDermott, acting FSA Director of Enforcement and Financial Crime, said after the Mitsui case: “If those who hold senior positions in financial services firms had any doubt about how seriously we view their regulatory responsibilities this fine and ban should make our position clear”.

The background details can be found in the two Final Notices but the following deficiencies are worth noting, especially by firms’ MLROs/COs, as being equally relevant to firms other than banks:

  • Insufficient records of staff AML training, and training not adequately addressing shortcomings in AML practice identified by the MLRO
  • Not conducting sufficient Enhanced Due Diligence in relation to higher risk customers (e.g. when customer not physically present for identification purposes)
  • Inadequate reviews of AML systems and controls
  • Not taking into account the operational jurisdiction of corporate customers e.g. a UK incorporated company with operations in Africa should be assessed differently to one that acts solely in the UK
  • The annual MLRO report failing to assess the adequacy and effectiveness of its AML systems and controls
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