The UK Financial Conduct Authority has publicly censured Mohammad Ataur Rahman Prodhan, former chief executive officer of Sonali Bank (UK) Limited (“SBUK”), for breaching Statement of Principle 6 of the FCA’s Handbook, “Statements of Principle and Code of Practice for Approved Persons.”
The relevant period is defined in the Final Notice as June 2012 to March 2014. During this period, Prodhan served as chief executive officer of SBUK, the UK subsidiary of Sonali Bank Ltd., a Bangladeshi institution. In 2010, before Prodhan’s arrival at the UK branch, the FCA visited SBUK and found serious AML concerns. Thereafter, SBUK agreed to implement measures to rectify the deficiencies identified by the FCA.
Until 2012, Prodhan had no experience in UK financial services, and had not worked for the bank outside of Bangladesh. AS CEO and senior manager in charge of anti-money laundering compliance at SBUK, Prodhan was responsible for ensuring the establishment and maintenance of effective AML systems and controls, reporting to the board regarding these systems, developing effective internal controls of risks to SBUK’s business activities and its shareholders’ investments, ensuring the bank’s and bank employees’ compliance with regulatory requirements, and setting the bank’s values, culture and standards.
Although Prodhan was made aware of the FCA’s concerns identified in 2010 and the bank’s commitment to give close attention to financial crime issues, Prodhan did not devote appropriate oversight to these matters. And despite internal audit reports in 2012 and 2013 pointing to the failure to identify and assess risks, the bank, under Prodhan’s leadership, failed to remediate. At the same time, Prodhan delegated responsibility for maintenance of SBUK’s AML systems to the money laundering reporting officer, without taking reasonable steps to ensure that he himself had an adequate grasp of AML risks and how the bank was managing them. And when warning signs emerged through audit committee reports, queries by the money laundering reporting officer regarding the low level of suspicious activity reports, and other indicators, Prodhan failed to take measures to address these concerns.
In 2014, the FCA again visited SBUK, and identified serious AML failings. The FCA appointed a skilled person to examine and report on SBUK’s AML systems and controls; the FCA also required the bank to take immediate actions to address AML risks. The appointed skilled person reported in July 2014 that there were systemic AML failings arising from “a lack of understanding and implementation of systems and controls throughout the Bank.” In October 2014, Prodhan ceased to be responsible for the bank’s AML systems, although he continued to serve as CEO until May 2015.
The FCA found that, in addition to violating Principle 6, Prodhan was knowingly concerned in SBUK’s breach of Principle 3, which requires that a firm take reasonable steps to ensure that adequate risk management systems are in place, and that its business is organized responsibly and effectively.
The FCA initially issued a Decision Notice recommending a financial penalty of £76,400, in May 2018. But since that time, Prodhan returned to Bangladesh, leaving no residual links to, or assets in, the United Kingdom. He has retired from employment, and his ability to travel outside of Bangladesh for a hearing is severely limited. Moreover, nearly ten years have elapsed since the misconduct took place. In light of these circumstances, whilst maintaining that a financial penalty would be appropriate, the FCA instead issued a public censure, which Prodhan has agreed to accept.
SBUK was sanctioned by the FCA in October 2016. A financial penalty of £3,250,600 was imposed, and its ability to accept deposit from non-SBUK customers was limited for a period of 168 days. The bank invested in improving its AML systems and controls thereafter, and appointed an independent non-executive director with AML expertise. At the same time, SBUK decided to close all but two of its branches by 2017. Also in October 2016, the FCA issued a Final Notice to SBUK’s compliance officer and money laundering reporting officer, Steven George Smith, imposing a financial penalty of £17,900 and prohibiting him from performing compliance oversight, money laundering reporting, or senior management functions.