Author:Andrew Haynes
Position:Law School, University of Wolverhampton, Wolverhampton, UK
Money laundering responses
The steps taken in recent years against banks by regulators and law enforcement bodies
in relation to money laundering have garnered a lot of publicity. The year 2015 saw
Barclays ned £72m by the FCA over a £1.9bn deal that ran the risk of being used by
launderers and those nancing terrorism. The size of the ne related to the fact that staff
had kept relevant client details in a safe rather than on the bank’s software. The case
involved Barclays relaxing their assessment regime, and the bank had also broken its
own internal controls. There was, however, no evidence that Barclays had colluded in
money laundering. This was the seventh penalty imposed on Barclays by the FCA and
took the total nes that have been imposed on Barclays by the FCA since 2009 to £500m.
Barclays was ned US$2.4bn in the USA for LIBOR rigging, and the RBS Group was
ned US$395m for the LIBOR scandal by the US Department of Justice and had to pay
a further $205m to the Federal Reserve. In addition to this, Coutts Bank, the Royal Bank
of Scotland’s private banking arm, was ned £8.75m for breaching money laundering
rules in relation to politically exposed persons.
In the USA, matters are more extreme. HSBC was ned US$1.92bn for allowing itself
to be used by launderers in Mexico and terrorist nanciers in the Middle East. The bank
had also stripped details from transactions that would have identied Iranian entities
and potentially put the bank in breach of US sanctions against Iran. HSBC also spent
US$290m on remedial measures. Standard Chartered was ned US$667m in the USA for
breach of laundering regulations. They also hid details from the regulators of certain
clients, including Iranian ones.
Deutsche bank was ned US$258m for violating US sanctions as well. Their
employees had handled US$10.8bn in restricted transactions. The bank’s employees had
also obscured transactions in relation to Iran, Syria, Libya, Myanmar and Sudan which
were also subject to US sanctions at the time.
The biggest ne for sanctions violations was that of US$8.9bn imposed on BNP
Paribas who had breached the International Emergency Economic Powers Act and the
Trading with the Enemy Act. The size of the ne related to the size of the transactions
concerned, not the size of the prot made. The bank was also seen by the US regulators
in dragging its feet in co-operating.
There is an interesting issue here. The USA has ofcially not been trading with Iran
for a number of years, but its own balance of payments gures show a healthy balance
of payments surplus for the USA on trade with Iran. The year 2015 saw a surplus of
US$271.4m. A cynic might regard this as reecting the lobbying power of certain US
rms in Washington.
For banks and other nancial services rms, there are also the costs of applying
pan-European Union (EU) regulations, many of which are not well-designed for the UK
market. It has been estimated that Solvency II has already cost the UK insurance
industry over £3bn[1], a gure one leading UK regulator described as “shocking”[2] and
Andrew Bailey of the FCA described as “frankly indefensible”. Nigel Wilson, Chief
Executive of Legal and General, has pointed out that the costs imposed on UK nancial
services businesses by the EU are equivalent to half the cost of Crossrail. Add to that the
cost of the fees that have to be paid to the regulators, for example, last year, the biggest
Journalof Money Laundering
Vol.19 No. 4, 2016
©Emerald Group Publishing Limited
DOI 10.1108/JMLC-08-2016-0036

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