How is your Anti-Money Laundering Control Framework Stacking Up?

Published: December 16, 2024

Between June 2016 and December 2020, Metro failed to have the right systems and controls to adequately monitor over 60m transactions, with a value of over £51bn, for money laundering risks. Which led to the FCA imposing a £16,675,200 fine (Metro agreed to resolve this matter and qualified for a 30% (stage 1) discount under the Authority’s executive settlement procedures. Were it not for this discount, the Authority would have imposed a financial penalty of £23,821,700 on Metro)

Metro automated the monitoring of customer transactions for potential financial crime in June 2016. However, its system did not work as intended. An error in how data was fed into the system meant transactions taking place on the same day an account was opened, and any further transactions until the account record was updated, were not monitored.

Whilst many of these transactions were subsequently reviewed as part of a remediation exercise, there was a lengthy delay in the identification of suspicious activity and this increased the risk of Metro inadvertently being used for the purposes of financial crime

Junior staff did raise concerns about some transaction data not being monitored in 2017 and 2018, but these did not result in the issue being identified and fixed. Even once a fix had been put in place in July 2019, Metro did not have a mechanism to consistently check that all relevant transactions were being fed into the monitoring system until December 2020, over 4 and a half years after the system was implemented.

Metro Bank breached Principle 3 of the FCA’s Principles for Businesses – management and control.

Principle 3 – Management and control

A firm must take reasonable care to organise and control its affairs responsibly and effectively, with adequate risk management systems.

First Derivative can offer banks and other Financial Institutions services that are designed to avoid such failings for example,

Implementation of Strong Internal Controls
Setting up robust procedures and systems within an organization to detect and prevent fraudulent activities, ensuring financial integrity, and compliance with regulations.

Provision of Financial Crime Prevention Training and Education
Offering comprehensive training programs to educate employees about recognising and preventing financial crimes, understanding relevant laws and regulations, and knowing how to respond to potential threats.

Implementation of strong AML (Anti-Money Laundering) and KYC (Know Your Customer) Policies and Procedures
Establishing stringent AML/KYC policies and procedures to prevent and detect any illicit activity. Outlining Identification and Verification requirements, what an adequate risk assessment should look like and how ongoing monitoring is vital to ensure any potential risks and vulnerabilities are mitigated.

Development and Maintenance of a Strong Compliance Culture
Fostering a corporate culture that prioritises compliance with laws and regulations, encouraging ethical behaviour, and ensuring adherence to internal and external regulatory requirements.

These solutions collectively help First Derivative’s clients in safeguarding their operations against financial crimes, maintaining regulatory compliance, as well as protecting their reputation and financial stability.