On 12 October 2016, the Financial Conduct Authority (FCA) fined Sonali Bank (UK) Limited (SBUK) 3,250,600 under section 206 of the Financial Services and Markets Act 2000 (FSMA). With regard to SBUK's regulated activities, the FCA under section 206A FSMA also restricted it from accepting deposits from new customers for 168 days.
The FCA found that between 20 August 2010 to 21 July 2014, despite the clear warnings provided, SBUK suffered serious failings relating to its anti-money laundering (AML) governance and control systems. More specifically, SBUK was found in breach of FCA Principle 3 (taking reasonable steps to organise its affairs responsibly and effectively, with adequate risk management systems) of the FCA Principles for Businesses by having serious and systemic weaknesses in its AML controls. The FCA found that the weaknesses affected almost all levels of SBUK's business and governance structure, including the senior management team, money laundering reporting officer (MLRO) function, oversight of its branches and policies and procedures relating to AML. SBUK failed to comply with its operational obligations in respect of customer due diligence, the identification and treatment of politically exposed persons, transaction and customer monitoring and making suspicious activity reports. Moreover, while SBUK was being investigated by the FCA, it was found to be in breach of FCA Principle 11 (dealing with regulators in an open and cooperative way) by failing to notify the FCA for at least seven weeks that a potentially significant fraud had occurred.
Under section 66 FSMA, the FCA also fined the bank's former MLRO, Steven Smith, the sum of 17,900 and prohibited him from performing the MLRO or compliance oversight functions at regulated firms. Mr Smith was found by the FCA to be in breach of FCA Principle 6 (due skill, care and diligence in managing the business) of the FCA's Approved Persons and was knowingly concerned in the bank's breach of FCA Principle 3. Despite the warnings from the bank's internal auditors, Mr Smith reassured the bank's board and senior management that controls were working effectively.
Steven Smith also failed to:
put in place appropriate AML monitoring arrangements;
identify serious weaknesses in operational controls and a lack of appropriate knowledge among staff;
report appropriately concerns from internal auditors and the results of internal testing; and
impress upon senior management the need for more resources in the MLRO function.
Even though the FCA recognised that Mr Smith did not have sufficient senior management support and was overlooked, it considered that his failings were serious enough in their own right.
Both SBUK and Mr Smith agreed to settle at an early stage of the investigation and thus qualified for a 30% (stage 1) discount on their fines.