The UK's Financial Conduct Authority has fined mortgage lender millions for money laundering failures
28/10/2022
The Financial Conduct Authority (FCA) announced that it had fined specialist mortgage lender Gatehouse Bank for significant weaknesses in its financial crime systems and controls.
Gatehouse, which offers residential and buy-to-let loans and Sharia-compliant savings products, was fined £2,263,084; although this was reduced by 30% to £1,584,100 because it agreed to settle at an early stage of the investigation.
The FCA stated that Gatehouse had serious shortcomings in its anti-money laundering (AML) policies and procedures from 9 June 2014 to 5 July 2017; breaching provisions of the Money Laundering Regulations 2007.
Gatehouse opened an account for a company based in Kuwait to pool the funds of the business' customers for real estate investment.
The FCA said that the bank "relied" on the business to carry out diligence on the investors.
But, according to the FCA,
- Many investors were "high-risk, high-net-worth customers" and
- Gatehouse "took inadequate measures" to confirm the quality of the company's AML checks.
Gatehouse also failed to
- Ensure the company collected information about where the funds were sourced from, which is a requirement under the bank's AML policies.
The FCA said that Gatehouse accepted $62 million into an account linked to the company and its clients "without properly vetting the funds for money laundering risk".
The case is a clear reminder that it is of the utmost importance that financial institutions ensure they verify the identity of customers and adequately scrutinise the source of their funds.
Customers who are either PEPs (politically exposed persons) or who are domiciled in high-risk jurisdictions (where this is a greater likelihood of money laundering and / or terrorist financing) should be made to undergo an enhanced due diligence process.
Financial institutions need to
- Monitor customer relationships on an ongoing basis, with all information kept up to date and the level of monitoring reflecting the financial crime risk. It is also important for internal control systems to be adapted in such a way that any shortcomings in the know-your-customer due diligence process are immediately detected. This will involve having enough staff in the compliance department to run such due diligence checks.
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As well as owning and publishing Comsure's copyrighted works, Comsure wishes to use the copyright-protected works of others. To do so, Comsure is applying for exemptions in the UK copyright law. There are certain very specific situations where Comsure is permitted to do so without seeking permission from the owner. These exemptions are in the copyright sections of the Copyright, Designs and Patents Act 1988 (as amended)[www.gov.UK/government/publications/copyright-acts-and-related-laws]. Many situations allow for Comsure to apply for exemptions. These include 1] Non-commercial research and private study, 2] Criticism, review and reporting of current events, 3] the copying of works in any medium as long as the use is to illustrate a point. 4] no posting is for commercial purposes [payment]. (for a full list of exemptions, please read here www.gov.uk/guidance/exceptions-to-copyright]. Concerning the exceptions, Comsure will acknowledge the work of the source author by providing a link to the source material. Comsure claims no ownership of non-Comsure content. The non-Comsure articles posted on the Comsure website are deemed important, relevant, and newsworthy to a Comsure audience (e.g. regulated financial services and professional firms [DNFSBs]). Comsure does not wish to take any credit for the publication, and the publication can be read in full in its original form if you click the articles link that always accompanies the news item. Also, Comsure does not seek any payment for highlighting these important articles. If you want any article removed, Comsure will automatically do so on a reasonable request if you email info@comsuregroup.com.