NatWest has been fined more than £264m for anti-money-laundering failures that involved black bin liners stuffed full of cash being deposited, and sums so large that one branch’s two floor-to-ceiling safes proved “inadequate” for storing it all.
The Bradford jeweller Fowler Oldfield’s predicted annual turnover was £15m when first taken on as a client, but it ended up depositing £365m with the bank over a five-year period, including £264m in cash.
At the time, the National Crime Agency requested information about the customer and said that as this involved a lot of Scottish banknotes being deposited, “this money may have been related to the trade in controlled drugs”, court documents state. Law enforcement officers believed that the discovery of large amounts of Scottish banknotes in England was an indicator of criminal activity.
NatWest, part of NatWest Group, pleaded guilty in October to three offences of failing to comply with anti-money-laundering regulations. This related to its failure to properly monitor the activities of Fowler Oldfield between 8 November 2012 and 23 June 2016.
At Southwark crown court on Monday, Mrs Justice Cockerill fined the bank £264,772,620, ordered it to pay £4,297,466 in costs, and made a £460,047 confiscation order.
It is the first time a financial institution has faced criminal prosecution by the Financial Conduct Authority (FCA) under anti-money-laundering laws in the UK.
“Although in no way complicit in the money laundering which took place,” the judge said, “without the bank’s failures, the money could not be effectively laundered.”
Fowler Oldfield, which was shut down after a police raid in 2016, was initially marked as “high risk” after NatWest took it on as a client in 2011, but it was downgraded in December 2013.
Prosecutor Clare Montgomery QC said the firm purported to be in the business of buying scrap gold which was assayed and sold to jewellers in bars or grain. She said there “was a rapid escalation in the amount of cash” being deposited from November 2013, with figures reaching up to £1.8m a day, and by 2014 Fowler Oldfield was the “single most lucrative” client in the Bradford region.
About 50 branches across the country were used to make deposits, with Southall receiving £42m in cash between January 2015 to March 2016 – but no report was made that it was suspicious.
The court heard £700,000 was paid into the Walsall branch in a single day.
“At times, thousands of pounds in cash was brought into the branch uncounted in big black bin liners,” stated the agreed statement of facts. A member of staff later told FCA investigators that they often found that the weight of the cash “was too great for the bin liners, which would then break”. Staff would have to move the cash into stronger hessian sacks.
“The cash filled the branch’s two floor-to-ceiling safes. Excess cash and other items had to be stored behind grilles in the vault,” said the statement.
NatWest’s branch in Halifax, West Yorkshire, received £750,000 in three days, while the Piccadilly and New Bond Street outlets in central London, which had “several millions” in deposits, were concerned that it was more cash than they could deal with.
Concerns were raised at a cash centre over the presence of Scottish notes, which the court heard smelled “musty”, as if they had been “stored under the floorboards”.
An outgoing manager of another cash centre said the activity was “the most suspicious money laundering” he had ever seen but the financial crime manager took the view there were “macroeconomic reasons” for the spike in cash deposits.
The court heard NatWest recorded direct cash deposits as cheque deposits between 2008 and March 2017 on the bank’s automatic monitoring system, affecting about £165m in payments from Fowler Oldfield.
The court heard NatWest has invested £700m to tackle financial crime with another £1bn earmarked over the next five years. But Montgomery said there were “still concerns on behalf of the FCA”, with the completion date for one programme pushed back from 2020 to 2023.
John Kelsey-Fry QC, defending, said “the bank realises the seriousness of any failure to successfully discharge” its obligations and expressed “deep regret” on behalf of the board. “It did not escape the bank’s system, it did not go under the radar,” he said. “It was identified and subjected to scrutiny.
“The quality or adequacy of that scrutiny is another matter.”
NatWest’s chief executive officer, Alison Rose, said: “We deeply regret that we failed to adequately monitor one of our customers between 2012 and 2016 for the purpose of preventing money laundering.
“While today’s hearing brings an end to this case, we will continue to invest significant resources in the ongoing fight against financial crime.”