The UK’s financial regulator has fined Commerzbank £38m for money-laundering failures, including an “out-of-control” system for checking clients.
The Financial Conduct Authority (FCA) said the German business bank had failed to put money-laundering controls in place over a period of five years, despite three separate warnings from the regulator.
The fine is one of the largest handed out by the regulator in relation to money-laundering failures. Standard Chartered was fined £102m by the FCA in April 2019 for similar issues, although that was dwarfed by the $1.1bn penalty levied on the same bank by US authorities.
Commerzbank London qualified for a 30% discount on the fine because it agreed to cooperate. The full fine would have been £54m.
Due diligence checks on more than 1,700 clients of Commerzbank’s London office were overdue by 2017, when the regulator took action.
Some of these customers were able to carry on transactions with the bank despite the checks not having been completed because of an “out-of-control” system of exceptions, the FCA said.
The bank also failed to fix an automated tool for monitoring money-laundering risks. The FCA said Commerzbank London in 2015 found that 40 high-risk countries were missing from the tool, and 1,110 high-risk clients had not been added.
Commerzbank’s policies and procedures for customer due diligence were found to be inadequate.
Mark Steward, the FCA’s executive director of enforcement and market oversight, said: “Commerzbank London’s failings over several years created a significant risk that financial and other crime might be undetected. Firms should recognise that [anti-money laundering] controls are vitally important to the integrity of the UK financial system.”
The bank has been forced to carry out a “significant remediation exercise” to put the processes in place, as well as appointing a senior executive to test it.
The fine will add to financial pressure on Commerzbank, which hopes to cut costs after sustaining a €227m (£203m) loss before tax in the first three months of 2020.
A spokeswoman for the bank said the FCA had found no financial crime during its investigations. “Commerzbank has cooperated fully with the Financial Conduct Authority to mitigate any potential compliance risks promptly and appropriately,” she said.
“The FCA investigation relates to the time period of October 2012 to September 2017. The bank has successfully remediated and addressed the deficiencies that were the subject of the investigation.”