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Swiss bank EFGI's UK arm fined for lax money laundering checks

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(Globalpost/GlobalPost)

LONDON (Reuters) - The Financial Conduct Authority has fined the UK subsidiary of Swiss private banking group EFG International 4.2 million pounds for failing to establish effective anti-money laundering controls for its wealthy customers.

The FCA said UK regulators first became seriously concerned about procedures at EFG Private Bank Ltd during a spot check on how UK banks were managing money laundering risks in January 2011.

EFG is the third bank to be penalised in the UK over money laundering controls after Coutts, the exclusive private bank owned by Royal Bank of Scotland, was fined 8.75 million pounds and Swiss-owned Habib Bank AG Zurich was fined more than half a million pounds in 2012.

Seventeen EFG customer files, that had been opened between December 2007 and January 2011, highlighted "significant money laundering risks" but showed insufficient records of how the bank's senior management mitigated those risks, the FCA said.

Of those files, 13 related to allegations of criminal activity or showed that the customer had been charged with criminal offences, including corruption and money laundering.

One of EFG's customers, according to its own due diligence, acquired her wealth through her father, about whom there were allegations of links with organised crime and murder, the FCA said. Yet the bank provided scant information about how it was ensuring the money was clean or that the risks were acceptable.

"Banks are the first line of defence to make sure that proceeds of crime do not find their way into the UK," said FCA enforcement and financial crime head, Tracey McDermott.

"In this case, while EFG's policies looked good on paper, in practice it manifestly failed to ensure that it was addressing its AML (anti-money laundering) risks."

The bank said it was disappointed that shortcomings had been found between 2007 and 2011, but that it had taken remedial action to ensure its systems and controls were robust. It said the fine would not impact reported profits this year.

EFG fully cooperated with the investigation, qualifying for a 30 percent discount on a fine that would otherwise have been set at 6 million pounds.

The FCA took over as the new regulator from the now-defunct Financial Services Authority (FSA) at the beginning of this month.

(Reporting by Kirstin Ridley in London and Martin de Sa'Pinto in Zurich; Editing by Greg Mahlich)

http://www.globalpost.com/dispatch/news/thomson-reuters/130424/swiss-bank-efgis-uk-arm-fined-lax-money-laundering-checks