FCA fines Commerzbank £37m after AML policies became "out of control"

The regulator said the bank had failed to put adequate processes in place between October 2012 and September 2017, stating that at one point its AML function was “out of control.”

Despite being aware of weaknesses, the FCA said, Commerbank London failed to take reasonable steps to fix them. Specific concerns had been raised by the watchdog in 2012, 2015 and 2017.

The FCA said these weaknesses persisted even when it was publishing guidance on steps firms could take to reduce financial crime risk, and during a period in which the regulator took enforcement action against many firms over AML controls.

FCA executive director of enforcement and market oversight, Mark Steward, said: “Commerzbank London’s failings over several years created a significant risk that financial and other crime might be undetected. Firms should recognise that AML controls are vitally important to the integrity of the UK financial system.”

The FCA’s investigation identified failings in several areas, including Commerzbank London’s failure to:

• Conduct timely periodic due diligence on clients, which resulted in many existing clients not going through timely know-your-client checks. By 1 March 2017, 1,772 clients were overdue updated due diligence checks. Some of these were able to continue transacting with the bank’s London branch due to an exceptions process, which the FCA said was not adequately controlled or overseen and which became “out of control” by the end of 2016.
• Address long-standing weaknesses in its automated tool for monitoring money laundering risk on transactions for clients. For example, in 2015 Commerzbank London identified that 40 high-risk countries were missing, and 1,110 high-risk clients had not been added, to transaction monitoring.
• Put in place adequate policies and procedures to undertake customer due diligence on clients.

Commerzbank London therefore breached Principle 3 of the FCA’s Principles for Businesses, but it has now undertaken a remediation exercise to bring its AML controls into compliance. A skilled person has been testing the effectiveness of these enhancements, and this work is now complete, following a (likely expensive) review.

It has also conducted an extensive look-back exercise to identify suspicious transactions during the period in question. Commerzbank London also voluntarily implemented a wide-ranging business restriction, which included temporarily stopping taking on new high-risk customers and suspending all new trade finance business activities.

Commerzbank London agreed to resolve the matter at an early stage, qualifying for a 30 percent discount. Without the discount, the financial penalty would have been £54m.