In our Spring 2021 D&O Newsletter, we reported on the FCA’s decision to pursue criminal proceedings against NatWest and what that might mean for directors.
On 7 October 2021, in the first prosecution for money laundering of its kind, NatWest entered a guilty plea before Westminster Magistrates Court. The FCA has confirmed that no individuals are being charged, but does that mean that directors can now rest easy?
NatWest has pleaded guilty to three charges of failing to comply with anti-money laundering regulations between 2012 and 2016. Those failures relate to the accounts of Fowler Oldfield, a gold dealership in Bradford which, during the period in question, deposited a total of £365 million with the bank. Of that amount, £264 million had been accepted by NatWest as cash deposits.
Following NatWest’s guilty plea, the case has been referred to Southwark Crown Court for sentencing in December. It is expected that the starting point will be a fine of £170 million, which would be on a par with the £163 million fine imposed by the FCA on Deutsche Bank in 2019 for anti-money laundering failures. It is possible that the fine could be doubled to £340 million; if such a fine were imposed any reduction given in recognition of NatWest’s cooperation and early guilty plea would be small consolation for the bank’s stakeholders.
Although the UK government has been divesting itself of NatWest shares (at increased speed following the news that the FCA was prosecuting the bank), it remains the majority stakeholder. According to online commentary, public sentiment is running high with many calling for the directors to be held accountable.
As reported in our Spring article, the FCA’s decision to pursue criminal proceedings against NatWest appears to be consistent with the recommendations made by the Financial Action Task Force in 2018 that the FCA should ensure that “effective and dissuasive sanctions apply”where there have been failures in supervision which undermine the UK’s anti-money laundering efforts.
It is also consistent with a more general shift by the UK government towards personal, rather than corporate, responsibility intended to reinforce the UK’s position as a robust financial market in the post-Brexit era. Earlier this year Kwasi Kwarteng announced proposed changes to the audit regime which could see directors face fines or suspensions if they are negligent in performing the duties they owe to auditors and, in April and July, a total of 27 individuals were sanctioned under the UK’s Global Anti-Corruption sanctions regime.
The criminal fine imposed on NatWest is likely to be the most significant financial sanction for money laundering offences ever seen in the UK. Directors may breathe a sigh of relief that the FCA does not intend to prosecute individuals on this occasion but the sword of Damocles is likely to hang over the heads of directors for some time to come.