The UK Financial Conduct Authority has announced the imposition of a £4,023,600 fine on Al Rayan Bank PLC for anti-money laundering failures. Al Rayan is a subsidiary of Al Rayan (UK) Limited, in turn a subsidiary of Masraf Al Rayan Q.S.C., an Islamic bank based in Qatar. The bank provides savings, finance and current account services consistent with Sharia law.
According to the FCA, between April 2015 and the end of November 2017, Al Rayan did not maintain risk-sensitive policies and procedures, leading the firm to perform inadequate due diligence on high-risk customers, both in terms of identifying the sources of wealth and funds of new customers, and carrying out enhanced due diligence to monitor higher risk situations, even though a significant number of business and premier customers targeted by Al Rayan’s Knightsbridge branch were higher risk ultra-high net worth clients drawn from Gulf Cooperation Council states. Al Rayan’s 2015 policy manual, “Preventing Financial Crime,” warned staff that “Wealthy and powerful customers often wield political power and influence,” and are reluctant to provide evidence of beneficial ownership and source of wealth. The manual required the bank to obtain background information about its customers and to undertake additional due diligence on higher risk customers, but did not specify what information and documentary evidence should be collected.
Likewise, according to the FCA, Al Rayan failed to apply appropriate risk-sensitive policies to the treatment of cash deposits, while accepting £22.74 million in cash deposits of over £10,000 during the relevant period. As described in the Final Notice, Al Rayan’s policies provided that “special care is required in handling cash transactions for large amounts,” and “[a]ny questionable activity must be examined to establish the source of funds.” But the bank did not implement risk-sensitive policies or train its staff to know what to do when confronted with a cash transaction.
The FCA also noted that enhanced due diligence was not undertaken when the bank’s transaction review system indicated that it was necessary. Nor, according to the FCA, did Al Rayan’s internal audit department review the operations of the firm’s financial crime unit between 2009 and 2017.
Following visits by the FCA to Al Rayan in 2015 and 2017, the bank was told to address weaknesses in its anti-money laundering control framework, but failed to remediate in accordance with the action plan developed for that purpose. Thereafter, in July 2018, the FCA required Al Rayan to appoint a Skilled Person pursuant to section 166 of the Financial Services and Markets Act 2000. During the work of the Skilled Person, in April 2019, Al Rayan entered into a voluntary requirement restricting it from accepting or processing new deposit account applications from high-risk or politically-exposed persons or their family members. These restrictions were lifted in June 2022, after Al Rayan had worked for three years with the Skilled Person and committed significant resources to improving its anti-money laundering control framework.
The FCA found that Al Rayan’s failings violated Principle 3 of the Principles for Businesses, which provides that a firm must take reasonable care to organize and control its affairs responsibly and effectively, with adequate risk management systems. The FCA deemed as aggravating factors the prior express warnings Al Rayan had received in 2015 and 2017, and the firm’s failure to remediate following these warnings. The only mitigating factor considered by the FCA was Al Rayan’s commitment, in conjunction with the Skilled Person’s work, of significant resources to improving its anti-money laundering controls, and the firm’s voluntary requirement restricting the deposit account applications from certain high-risk persons.
In light of these factors, and Al Rayan’s agreement to settle with the FCA early in the investigation –resulting in a 30% discount off the £5,748,000 penalty — the FCA imposed a financial penalty of £4,023,600 on Al Rayan, to be remitted no later than January 25, 2023.