The Financial Conduct Authority has announced that it has commenced criminal proceedings against NatWest, accusing the bank of failing to prevent money laundering within its commercial banking division. It is the first time the FCA has brought a prosecution under rules introduced in 2007.

The watchdog alleges that the bank failed to properly scrutinise transactions linked to a corporate customer account that was collecting large cash amounts between November 2011 and October 2016 – it says £365m was paid in to the account during that period, including £264m in cash.

Under the requirements of the Money Laundering Regulations 2007, banks are required to “determine, conduct and demonstrate risk sensitive due diligence and ongoing monitoring of its relationships with its customers for the purposes of preventing money laundering”. The FCA alleges that NatWest's systems and controls failed to adequately monitor and scrutinise this activity.

Commenting on the announcement, Barry Faudemer, chief executive of Baker Regulatory Services, said that using criminal powers rather than deploying civil financial penalties is a significant development.

“The news that NatWest Bank has been charged with criminal offences by the FCA alleging inadequate systems and controls from 2011 to 2016 to forestall or prevent money laundering follows the international trend of law enforcement and regulators upping their game when it comes to holding businesses to account for failing to do enough to combat money laundering. Using criminal powers rather than deploying substantial civil financial penalties is a significant development and the first time that such criminal sanctions have been pursued against a high street bank," he opined.

“What is simply breathtaking is the alleged volume of the cash transactions. The FCA claims 'increasingly large cash deposits' were made into a UK account, including £264m in cash. It is alleged that the business paying funds into the account was a money broker which may explain the high volume of cash deposits. Just how the bank exercised its anti-money laundering systems and controls over such a long period of time is now set to come into sharp focus.”

NatWest is scheduled to appear at Westminster Magistrates’ Court on 14 April 2021. The bank – which is 62% owned by the UK government – faces unlimited fines if found guilty of breaching the anti-money laundering rules.

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