The UK Financial Conduct Authority has imposed a £7,671,800 fine on Guaranty Trust Bank (UK) Limited (“GT Bank”) for failing to comply with anti-money laundering rules and regulations. GT Bank is a wholly owned subsidiary of Guaranty Trust Bank Nigeria Limited, which in turn is a subsidiary of Guaranty Trust Bank Holding Company plc, a Nigerian multinational financial services institution operating in Africa and the United Kingdom.
In August 2013, the FCA issued a Final Notice and imposed a financial penalty of £525,000 on GT Bank for “serious and systemic” anti-money laundering failures that resulted in an “unacceptable risk” of the bank’s handling the proceeds of crime. Specifically, the FCA found that from May 2008 to July 2010, GT Bank had not maintained adequate, risk-sensitive systems and controls to enable it to identify and manage potential money laundering risks; nor, according to the Final Notice, had the bank carried out adequate customer due diligence or monitoring of higher risk customers.
Following the 2013 Final Notice, the bank engaged an external consultant who produced a report enumerating 65 items that the bank needed to address. On a supervisory visit to the bank in October 2014, the FCA identified several areas of deficiency, including missing customer due diligence documents, insufficient information about the sources of some customers’ wealth, inadequate transaction monitoring, lack of clarity surrounding initial customer risk assessments, and limited evidence that customers had undergone politically exposed person (“PEP”), sanctions and adverse media screening. After the supervisory visit, GT Bank committed to the implementation of a new risk assessment framework and a new transaction monitoring system; the bank also undertook to engage in a Look Back exercise to review and complete its customer files. As part of this exercise, the bank reviewed 1,156 active customer files, but did not put in place a follow up process, leaving 314 incomplete files that were later updated with public source information and information already in the files.
On a second supervisory visit to GT Bank in June 2017, the FCA found that there were still significant weaknesses in the bank’s anti-money laundering systems and controls. A Skilled Person was appointed to assess GT Bank’s remediation plan and to evaluate the adequacy of the bank’s financial crime governance and the efficacy of its systems and controls for sanctions and anti-money laundering compliance. The Skilled Person produced a report in May 2018 pointing to persistent anti-money laundering systems and controls deficiencies such as insufficient and ineffective escalation and review of suspicious activity, gaps in the system’s integration into the bank’s operations, missing documentation in customer files, and failure to adhere to the bank’s own periodic customer file review process. The Skilled Person also reported that 62 percent of customer files did not contain up-to-date customer due diligence or enhanced due diligence, and 74 percent of the testing sample of high risk and very high risk customers had not been reviewed with the frequency required by GT Bank’s policies. The Skilled Person noted further that the bank’s approach to transaction monitoring was inadequate and inefficient, and did not reflect the different sectors and types of customers of the bank. The Skilled Person identified additional areas of weakness, citing the dismissal of 83 percent of PEP alerts and 90 percent of sanctions alerts as unsubstantiated.
During the period after the FCA’s visit, GT Bank had suspended the onboarding of new customers, and later agreed to the voluntary imposition of additional restrictions on new customers and new products. The restrictions were suspended in June 2020 by temporary grant of the FCA. The bank also conducted an internal review, prompting the initiation of a Six Point Review to identify and remediate deficiencies in its high and very high risk customer files. Although, according to the Final Notice, 630 high risk customer files were remediated as part of this review, 285 customer files remained unremediated.
According to the FCA, nearly all areas of compliance were lacking during the relevant period, October 2014 to July 2019. In addition to the systems and controls, transaction monitoring, due diligence and screening issues noted above, the FCA found that GT Bank’s senior management failed to address the root causes of the deficiencies, failed to establish clearly defined roles and responsibilities in the compliance function, and failed to ensure that compliance was adequately funded, resourced, or trained.
The FCA found that GT Bank’s conduct breached Principle 3 of the FCA’s Principles for Businesses during the period between October 2014 and July 2019 by failing to:
- take reasonable care to organize and control its AML processes, and by failing to implement adequate risk management systems;
- conduct adequate customer due diligence and enhanced due diligence;
- maintain updated and accurate customer files;
- monitor customer transactions adequately and effectively;
- take action to rectify the weaknesses in its anti-money laundering and sanctions systems and controls, after these deficiencies were identified by the FCA, internal auditors, the external consultant, and the Skilled Person;
- train customer-facing and compliance staff adequately, or;
- implement a culture that recognized the importance of preventing financial crime.
The FCA found, further, that GT Bank’s conduct violated rules 6.1.1R and 6.3.1R of the Senior Management Arrangements, Systems and Controls section of the FCA’s Handbook of rules and guidance.
In determining the appropriate penalty, the FCA took into account the seriousness of the breach, and aggravating factors – in particular GT Bank’s prior deficiencies, prior notice of such deficiencies, and its failure to follow the FCA’s guidance and to remediate adequately. The FCA found only one mitigating factor, GT Bank’s voluntary imposition of restrictions on onboarding new customers in 2018. And while increasing the penalty amount for purposes of deterrence, the FCA granted the bank a 30 percent discount for settling early and not disputing the FCA’s findings, reducing what would otherwise have been a £10,959,700 fine to £7,671,810.