Recently, the UK Financial Conduct Authority fined Commerzbank AG for its lack of money-laundering controls and failure to improve them despite a series of warnings from the U.K. watchdog and multiple investigations in the U.S.
Commerzbank AG has been ordered to pay £37.8m ($47m), which includes a 30 percent discount for early cooperation, for its failure to install adequate anti-money-laundering (AML) systems and controls at its London unit between October 2012 and September 2017. Germany’s second-largest lender didn’t conduct timely due diligence on a “significant number” of customers and neglected to fix an automated tool used to monitor transactions for money-laundering risks. Commerzbank London was aware of these weaknesses and failed to address them despite the FCA raising specific concerns about them in 2012, 2015, and 2017.
There wasn’t evidence of any financial crime taking place because of the lack of controls, but there were several systems shortcomings, according to the FCA. Those cited include the bank’s failure to conduct periodic due diligence on its clients, address longstanding weaknesses in its automated tool for monitoring money laundering, and practice adequate procedures for onboarding new clients. The system did not flag some 40 high-risk countries and 1,100 high-risk clients as of 2015. Therefore, Commerzbank breached Principle 3 of the FCA’s Principles for Businesses, which requires firms to have adequate risk management systems.
FCA Director of Enforcement Mark Steward said that Commerzbank’s negligence created a significant risk of financial crime going undetected, and that “Firms should recognize that AML controls are vitally important to the integrity of the U.K. financial system.” Commerzbank has since initiated a “significant remediation exercise” to bolster controls in London, including temporarily halting taking on new high-risk customers and suspending all new trade finance business activities. The bank will also conduct an extensive look-back exercise to identify suspicious transactions during the period in question.