By Adrianne Appel, 2 December 2024
The UK Financial Conduct Authority (FCA) has fined Metro Bank £16.6 million (US $21 million) for an alleged failure by its automated system to adequately monitor money laundering risks.
Financial institutions are required by the FCA to conduct anti money laundering (AML) monitoring as a way to counter criminal activity. Individuals and organisations that make money through crime often try to engage in bank transactions or to open legitimate bank accounts in an effort to ‘wash’ and hide the dirty money.
Metro, which was founded in 2010, installed an automated financial crime monitoring system in June 2016 that ‘did not work as intended,’ the FCA alleged.
Data entry bug
A bug in how data was entered into the system meant that any transactions that took place on the same day an account was opened, and any additional transactions that occurred until the account record was updated, went unmonitored, the FCA alleged.
Junior staff at Metro flagged the inadequate monitoring multiple times in 2017 and 2018, but didn’t identify and start the mitigation process until April 2019, the regulator alleged in a final order.[1]
By July 2019, the bank thought the issue had been resolved but failed to properly audit the system to ensure customer transaction data was indeed fed into it, the FCA alleged.
The FCA said Metro failed to fully mitigate the issue until December 2020. The authority determined the bank did not adequately monitor 60 million transactions, with a total worth of £51 billion (US $65 billion).
‘Metro’s failings risked a gap being left in our defence against the criminal misuse of our financial system. Those failings went on for too long,’ said Therese Chambers, FCA Joint Executive Director of Enforcement and Market Oversight, in a press release.[2]
Metro breached Principle 3 of the FCA’s Principles for Businesses, which states that firms must control their affairs and have adequate risk management systems in place.
The bank would have been fined nearly £24 million (US $31 million) but the penalty was reduced 30% because the firm agreed to resolve the problems, the FCA said.
This article has been republished with permission from Compliance Week, a US-based information service on corporate governance, risk, and compliance. Compliance Week is a sister company to the International Compliance Association. Both organisations are under the umbrella of Wilmington plc. To read more visit www.complianceweek.com