The Financial Conduct Authority has fined Commerzbank London £37.9m for failing to have proper controls to prevent money laundering over a five-year period.
Announcing its second-largest ever fine for failures to combat potentially illegal transitions, the FCA said Commerzbank’s failures to put anti-money laundering systems in place between 2012 and 2017 had “created significant risk”.
Commerzbank’s London division was aware of weaknesses in its anti-money laundering (AML) systems and controls, the FCA said, but “failed to take reasonable and effective steps to fix them” despite the regulator raising concerns on three occasions.
“Commerzbank London’s failings over several years created a significant risk that financial and other crime might be undetected,” said Mark Steward, the FCA’s executive director of enforcement and market oversight.
“Firms should recognise that AML controls are vitally important to the integrity of the UK financial system,” he added.
The fine comes as Commerzbank is locked in a conflict with activist investor Cerberus, which has called for significant changes to be made to the lender’s management and strategy.
The FCA said it had identified a number of failings in the bank’s AML provisions, including the failure to conduct timely due diligence checks on clients.
By 1 March 2017, Commerzbank’s background checks were overdue on 1,772 customers, the FCA said.
Many of the customers were allowed to continue to conduct business with the London branch of the bank under an “exceptions process” that became “out of control” by the end of 2016, it added.
Commerzbank London also failed to address long-standing weaknesses in its automated tool for monitoring money laundering risk on transactions, the watchdog said.
The lender agreed to resolve the matter at an early stage of its investigation, the FCA said, entitling it to a 30 per cent discount on its fine. Without this, the bank would have been fined over £54m.
The penalty is the second-largest fine to be imposed by the regulator for deficiencies in AML provisions.
The FCA last year ordered Standard Chartered to pay £102m over breaches of anti-money laundering regulations within its investment and retail banking divisions.
A spokesperson for Commerzbank said it had fully cooperated with the FCA’s investigation, which found no actual financial crime.
“The Bank has taken the findings of the regulator very seriously,” the spokesperson continued. “Commerzbank London has therefore undertaken a significant remediation exercise.”
Stephen Baker, senior partner at law firm Baker & Partners, said the fine “is yet another example of large financial institutions failing to appreciate that anti-money laundering laws, rules and regulations do in fact apply to them”.