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NatWest’s anti-money laundering failure is highlighted in the gold dealer case

The sight of people carrying £700,000 in black bags through the West Midlands shopping center to a NatWest branch was just one surprising red flag among many warning signs the British bank missed. failed to stop a £365 million money-laundering scheme.

Over a five-year period, Fowler Oldfield, a Yorkshire gold dealer with a predicted annual turnover of £15m, deposited £365m in NatWest – including £264m in cash.

Some unusually large personal deposits – £42m in cash paid into a branch in Southall between 2015 and 2016; £750,000 was transferred to Halifax within three days.

At the NatWest shopping center in Walsall – where £6.6m of cash was deposited, including £700,000 paid on 14 September 2015 – bags burst due to the high volume of banknotes and branch staff must move them into stronger sacks, Southwark Crown Court heard during the bank’s sentencing hearing this week. Money was filled from two floor-to-ceiling safes at the branch and even more had to be stashed behind the bank’s grating.

FCA prosecutor Clare Montgomery QC said: “Someone was walking across the street with boxes of black money.

However, no suspicious activity reports (SARs) were issued by NatWest to the National Crime Agency prior to 2016, when West Yorkshire police said they were investigating Fowler Oldfield.

NatWest, the UK government’s majority-owned company, this week had to pay penalties for its omissions, with a criminal record and a £264.8 million fine for breaching anti-regulations money laundering from November 2012 to June 2016. The outcome marks the first crime. prosecuted by the Financial Conduct Authority (FCA) using anti-money laundering laws.

“NatWest is responsible for a portfolio of failures in the way it tracks and reviews transactions that are clearly suspicious,” said Mark Steward, director of market enforcement and oversight at the FCA. , director of enforcement and market supervision at the FCA, who added that the bank’s actions have created “the door for money laundering. ”

Eleven individuals have pleaded guilty to money laundering in connection with the delivery of cash to Fowler Oldfield and 13 others have been charged.

The case underscores the FCA’s greater determination to tackle a wave of dirty money that is estimated to cost the UK economy £100 billion a year and calls into question the weakness in its ability to contain it. bank fraud.

Red flag miss

Fowler Oldfield became a client of NatWest in 2011. Since the end of 2013, at least 50 bank branches in the UK suddenly started accepting millions of pounds in cash deposits, at one point £1.8 million being paid out. payments at a time, Southwark Crown Court said.

Employees at branches and cash centers, who are responsible for handling these deposits, reported their suspicions to colleagues. About 11 internal warnings were issued and NatWest’s automated anti-money laundering system was activated 10 times.

Walsall's Town Center
At NatWest shopping center in Walsall – where £6.6m of cash was deposited – bags burst due to the high volume of banknotes and branch staff had to transfer them into stronger sacks, Southwark Crown Court ordered to testify in the bank’s sentencing hearing this week. © David Linney / Alamy

But no appropriate action was taken by the bank, the FCA said. At the Walsall branch, employees even tried to raise the alarm internally, but the bank could not find any records.

Many cash deposits are stated in the case to be made through “quick drop” trading machines in branches that do not require interaction with the banker – although this method is marked was a concern in the UK government’s 2015 money laundering country risk assessment, the regulator noted.

NatWest’s cash center in Washington in northeastern England has sounded the alarm when cash has literally failed a smell test. The staff note that banknotes will “occasionally have a prominent musty odor, indicative of longer storage than business use.”

Employees were also troubled by the “unusually large volume” of Scottish banknotes deposited by Fowler Oldfield, whose headquarters are miles from the Scottish border. The NCA, which is investigating Scottish banknotes in the UK and possible links to criminal activity, has been alerted but no SAR has been raised.

A near-retirement manager at NatWest’s cash center in Basingstoke, Hampshire in 2015 shared his concerns with a financial crime manager about “the most suspicious potential money-laundering case he’s ever seen.” I’ve seen in my career.” But the bank said it had a full explanation, the court heard.

NatWest’s failures

There are significant gaps in NatWest’s processes. Its automated transaction monitoring system incorrectly identified some cash deposits as checks, which carry a lower risk of money laundering. The bank has not classified Fowler Oldfield as a high-risk customer for two years.

The only SAR raised to NCA involved accounts of a hair extensions supplier that received around £387,000 from Fowler Oldfield. No SAR is sent to the gold dealer itself. Internal warnings were investigated at an office in Hertfordshire, where some staff were inexperienced and wanted to close cases in 30 days, the court heard.

Justice Sara Cockerill, who convicted NatWest, pointed to the “obvious nature of several failures” in the bank’s systems and said without them “money could not be effectively laundered.”

John Kelsey Fry QC, representing the bank, told Southwark Crown Court staff “didn’t miss” the activity. “The quality and adequacy of that monitoring is another matter.”

Alison Rose, chief executive officer of NatWest, expressed “deep regret” about the failures. The bank currently employs 5,000 dedicated staff and will spend £1 billion between 2021 and 2025 to improve its fight against financial crime.

No action has been taken against any current or former employee of NatWest.

Roger McCormick, senior visiting fellow at the Bayesian School of Business, said: “The worry is that even a complex and complex set of anti-money laundering processes can leave you frustrated if something goes wrong. failure in common sense at the human level and apparent helplessness. to take effective action on what appears to be a set of clear red flags. “

The case also highlights the lack of sophistication of some financial criminals: “The sheer copper neck of people who are willing to carry too much cash to launder into bank branches and deposit over the counter in plastic bags reminds us that a lot of Mark Mullen, chief executive officer of Atom Bank, said.

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