A PRIVATE bank that counts the Queen among its clients was fined £8.75 million by the City watchdog yesterday for failing to do enough to ensure it was not handling laundered money.
Coutts & Co, which is owned by Royal Bank of Scotland, did not have the proper checks in place when it started relationships with high-risk customers, considered vulnerable to corruption, the Financial Services Authority (FSA) said.
Hitting the bank with its second fine in four months, the FSA said the failings were “serious and systemic” and went on for nearly three years, leading to an “unacceptable risk” of the bank handling the proceeds of a crime.
The regulator found deficiencies in nearly three-quarters of the high-risk or “politically exposed persons” whose files it examined – although there was no evidence that Coutts had actually handled stolen money.
The fine is the largest ever issued by the FSA in connection with anti-money laundering issues.
It could have been as high as £12.5m but Coutts was given a 30 per cent discount after agreeing to settle at an early stage.
The latest penalty means RBS, which is 82 per cent owned by the taxpayer, has been fined £25m by the FSA in the past two years.
Its problems have included lax controls, which put the banking group at risk of laundering money for terrorists, poor complaints handling at RBS and NatWest, and altering insurance files at Direct Line and Churchill.
And Coutts was fined £6.3m in November for flouting regulations when giving risk advice to customers on the AIG Enhanced Variable Rate Fund.
Tracey McDermott, the FSA’s acting director of enforcement and financial crime, said: “Coutts’ failings were significant, widespread and unacceptable.
“Its conduct fell well below the standards we expect and the size of the financial penalty demonstrates how seriously we view its failures.”
The number of high-risk customers being dealt with by Coutts increased as it expanded its customer base, while at the same time the laws regarding financial crime were being toughened up.
The FSA’s investigation found that, between December 2007 and November 2010, Coutts did not apply robust enough controls when starting new accounts and also failed to adequately monitor them once they were opened.
Overall, the FSA said Coutts’ anti-money laundering team failed to provide an appropriate level of scrutiny and challenge, including not doing enough research on where prospective clients’ money had come from and not appropriately scrutinising transactions.
The FSA said a number of improvements had already been made and Coutts said it was confident that its systems were now robust.
Rory Tapner, chief executive of RBS’ wealth division, said: “We are disappointed that Coutts & Co did not meet the FSA’s standards with regard to establishing and maintaining effective AML controls in relation to high-risk clients.
“We remain committed to ensuring that our systems and controls are robust and counter the risk of financial crime in all the markets in which we operate.”