On 13 December 2021 NatWest was fined approximately £265m after pleading guilty to three criminal charges of failing to adequately monitor its customer’s accounts for signs of money laundering between 2012 and 2016.
Given the scale and complexity of this case, the fine, the high-profile court case, and the detailed statement of facts released at sentencing, the entire industry is looking at this case for ways to do better. So what had happened?
Fowler Oldfield, a NatWest customer and jewellers in Bradford, was founded in 1897 and operated for many years as a legitimate jewellery business. In recent years however, Fowler Oldfield presented itself as a ‘cash for gold’ business while in many ways acting like a criminal bank.
The customer started bringing bag after bag of cash into their NatWest branch each day, worth hundreds of thousands of pounds. The deposits escalated over a five year period, amounting to approximately £1million per week on average. After five years the customer had deposited £365million in total, £264million of it in cash.
The sentencing doesn’t suggest that staff did not know what to look for, or that NatWest’s procedures were fundamentally wrong. In fact, many people raised concerns, but activity carried on for much longer than it should have been able to.
The industry must learn the fundamental lesson that every line of defence the bank has against money laundering is both an opportunity to catch criminal activity, and a chance to fail or be misled. A wrong classification here, an over-trusting relationship manager there, and even the most blatant of behaviour can go unreported.
The need to update Know-Your-Customer profiles regularly, reduce the reliance on relationship managers for assessing risk, accurately identify customer business models, and build thorough risk assessments, are just some of the things that the industry is learning from this case.
With $12 billion spent globally by banks each year on financial crime compliance, but with only 1-2% of suspicious activity identified likely to be of immediate value to law enforcement agencies, the Fowler Oldfield case can teach the industry much in terms of the need for enhanced detection, the malicious ingenuity of the criminals involved, and the far-reaching impact of their crimes.
With 75% of financial crime professionals unable to efficiently test the effectiveness of their detection systems against real-world criminal behaviours, the FinCrime Testing Service is rethinking detection.
Based on deep research into criminal behaviours and money laundering typologies, the FinCrime Testing Service helps banks understand which criminal behaviours they are missing.
As the quest to fight financial crime becomes ever more complex, Ben Tutt investigates how a criminal organisation managed to bypass the AML solutions of a multi-national, seasoned bank for so long, and what the whole industry can learn from the NatWest/Fowler Oldfield case
