FSA fines Habib Bank AG Zurich £525,000 and money laundering reporting officer £17,500 for anti-money laundering control failings

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The Financial Services Authority (FSA) has fined Habib Bank AG Zurich (Habib) £525,000 and its former Money Laundering Reporting Officer (MLRO) Syed Itrat Hussain £17,500 for failure to take reasonable care to establish and maintain adequate anti-money laundering (AML) systems and controls.

…The FSA’s investigation identified that during the period 15 December 2007 to 15 November 2010, Habib failed to establish and maintain adequate controls for assessing the level of money laundering risk posed by its customers.  In particular, Habib maintained a high risk country list which excluded certain high risk countries on the basis that it had group offices in them.  However, Habib’s local knowledge of these countries did not negate the higher risk of money laundering they presented.  The FSA also found that Habib failed to conduct adequate enhanced due diligence in relation to higher risk customers.

In two-thirds of the 68 customer files it reviewed, the FSA found one or more of the following significant failings:

  • the account had been inappropriately classified as normal risk;
  • the enhanced due diligence conducted was inadequate (in that insufficient information or supporting evidence had been gathered); and
  • the enhanced due diligence had not been conducted prior to transactions occurring on the account.

As MLRO, Hussain was responsible for oversight of Habib’s AML systems and controls, but failed to ensure that these systems and controls were adequate.  The FSA imposed a financial penalty on Hussain for these failings. He has now retired from the financial services industry.

Extract from the final notice:

SUMMARY OF REASONS
2.1. Habib breached Principle 3 because it failed to take reasonable care to establish and maintain adequate anti-money laundering (“AML”) systems and controls between 15 December 2007 and 15 November 2010 (“the Relevant Period”).

2.2. The laundering of money through UK financial institutions undermines the UK financial services sector. It is the responsibility of UK financial institutions to ensure that they are not used for criminal purposes and, in particular, that they do not handle the proceeds of crime. Unless firms have in place robust systems and controls in relation to
AML, particularly with regard to high risk customers, they risk leaving themselves open to abuse by money launderers. This action supports the FSA’s statutory objectives of the reduction of financial crime and the maintenance of confidence in the financial system.

2.3. The failings at Habib continued for almost three years and exposed Habib to an unacceptable risk of handling the proceeds of crime. In particular, Habib failed to:

a) establish and maintain an adequate procedure for assessing the level of money laundering risk posed by prospective and existing customers (including maintaining a flawed High Risk Country List);

b) conduct sufficient enhanced due diligence (“EDD”) in relation to higher risk customers;

c) carry out adequate reviews of its AML systems and controls; and

d) revise training adequately to address shortcomings in AML practice identified by the MLRO and to maintain sufficient records of staff completion of AML training and of all AML steps taken on individual customer accounts.

2.4. As part of its investigation, the FSA reviewed some of Habib’s customer files and found one or more of the following significant failings in 46 of the 68 files it reviewed:

a) the customer’s account had been inappropriately regarded as normal risk rather than higher risk;

b) the EDD conducted was inadequate; and/or

c) EDD had not been conducted prior to transactions occurring on the account.

 

FSA press release link: here

Final notice on Habib bank: here

Final notice on Habib’s MLRO: here