Banks feel heat after FCA’s money laundering prosecution of Natwest 

Banks feel heat after FCA’s successful money laundering prosecution of Natwest

The successful prosecution of Natwest over money laundering failings will act as a stark warning to banks, according to City lawyers.

In a case brought by the Financial Conduct Authority, Natwest was charged after failing to prevent £365million of money allegedly being laundered by a single customer.

The bank pleaded guilty to three breaches of anti-money laundering rules at Westminster Magistrates’ Court yesterday.

Guilty: In a case brought by the Financial Conduct Authority, Natwest was charged after failing to prevent £365m of money allegedly being laundered by a single customer

It marked the FCA’s first major win on money laundering and a new phase in the watchdog’s charge against shoddy practices and weak links in the City.

The FCA has previously been branded ‘toothless’ by MPs, as the number of cases it pursued, and the size of fines it levied, were dwarfed by international peers such as America’s Securities and Exchange Commission (SEC).

But Natwest, which is still majority-owned by the taxpayer following its bailout during the financial crisis, is facing a multi-million-pound fine.

A judge will decide the final penalty during sentencing later this year, but the FCA claims Natwest should have to cough up £340million.

This would consist of a £170million fine for damages caused, doubled due to Natwest’s culpability.

Neil Williams, deputy head of complex crime at Reeds Solicitors, said: ‘Today’s plea by Natwest marks a milestone for the FCA. 

This was the first time that it [the FCA] had begun criminal proceedings under the 2007 [money laundering] regulations.’

Williams said there had been a perception in the City in the past that the FCA was ineffective. 

He said: ‘If you do the comparison with international peers on the levies imposed or the number of prosecutions pursued, the FCA pales into comparison. There has been a reluctance to use the powers it has.’

But Natwest’s public shaming will strike fear into other major banks, Williams said, and will force them to clean up their act.

He added: ‘There will no doubt be other institutions monitoring proceedings with interest, and [the case] should have compliance departments reviewing their own procedures to ensure adherence to the regulations. The message from the FCA is clear: comply or face court.’

The win against Natwest will come as a boost to the FCA’s new boss Nikhil Rathi, who has promised that the watchdog will become more aggressive in its pursuit of wrongdoing.

British lenders have been prosecuted abroad for money laundering before. HSBC agreed to pay a £1.2billion fine to regulators in the US in 2012 after admitting it had served as a middleman for Mexican drug cartels.

But until now the FCA had not brought any prosecutions under the anti-money laundering powers it was given 14 years ago.

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