Gatehouse Bank fined £1.5m over poor anti-money laundering checks

The Financial Conduct Authority (FCA) has fined Gatehouse Bank £1,584,100 for significant weakness in its financial crime systems and controls.

Between June 2014 and July 2017 Gatehouse failed to conduct sufficient checks on its customers based in countries with a higher risk of money laundering and terrorist financing. Gatehouse also failed to undertake the correct checks when some of the customers were classed as Politically Exposed Persons (PEPs).

In one instance, Gatehouse Bank set up an account for a company based in Kuwait to aggregate customer funds. Gatehouse Bank did not require the company to collect information about customers’ source of funds or wealth, which was required under Gatehouse’s anti-money laundering policies. As a result, over a two-year period, Gatehouse accepted US$62,000,000 into the account without properly vetting the funds for financial crime risks. This example illustrates the risks of failing to have proper systems and controls.

Gatehouse has subsequently taken significant steps to improve its financial crime systems and controls.

Mark Steward, Executive Director of Enforcement and Market Oversight, said “Gatehouse Bank’s failures exposed itself to the risk that it might be used as part of a laundering process for illegal funds. While not deliberate, there can be no excuse for failures as serious as this. The FCA will continue to hold firms to account for poor anti-money laundering systems and controls.”

Commenting in the fine, Martin Cheek, Managing Director of SmartSearch said “This is a significant ruling by the FCA. Despite acknowledging that the bank’s exposure to risk was not deliberate, the regulator still imposed a substantial fine, saying there were no excuses for serious failures.
“This serves as a sharp reminder to all financial organisations that unintentionally breaching the rules is not a defence. The fines and reputational damage were still meted out. And, had the bank not settled early in the investigation, the amount would have been £2.2m.”

“The bank also failed to carry out the correct checks on customers classed as politically exposed persons (PEPs). With thousands of individuals and entities added to sanctions lists this year, this shortcoming underlines the difficulty of verifying clients – new and existing – in an ever-changing sanctions landscape.”

“Electronic verification is the most effective way for regulated firms like Gatehouse to identify new customers and monitor existing ones as well as provide evidence of a robust sanctions screening process.”