Santander U.K. hit with £108 million fine after FCA money laundering probe

By Scott Kanowsky 

Investing.com --Britain's financial watchdog has slapped a fine worth nearly £108 million (£1 = $1.2274) on Banco Santander's U.K. business, citing deficiencies in the lender's anti-money laundering controls.

The Financial Conduct Authority said Santander failed to "properly oversee and manage" its systems in place to prevent money laundering over a nearly five-year period from the end of 2012 to October 2017, which "significantly" impacted the oversight of more than 560,000 business accounts. In 2017, business banking made up 4% of Santander U.K.'s total customer base.

"Santander had ineffective systems to adequately verify the information provided by customers about the business they would be doing," the FCA added in a statement on Friday. "The firm also failed to properly monitor the money customers had told them would be going through their accounts compared with what actually was being deposited."

In one example cited by the FCA, a new customer opened a business account with expected monthly deposits of £5,000. However, within six months, it was receiving millions of pounds in deposits, which were then subsequently transferred to separate accounts.

According to the FCA, Santander's anti-money laundering team recommended in March 2014 that the account be closed down, but "poor processes and structures" meant that this was acted on until September 2015. Law enforcement then asked that the account remained open, but Santander "failed to keep track of this request" and allowed the account to stay active until the FCA wrote to the bank about the issue in December 2016.

"The FCA identified several other Business Banking accounts which Santander failed to manage correctly, leaving the bank open to serious money laundering risk. There were also examples of the bank failing to promptly deal with 'red flags' associated with suspicious activity, such as automated monitoring alerts," said Mark Steward, executive director of enforcement and market oversight at the FCA.

These failures led to more than £298M passing through Santander before the accounts were shuttered, Steward said.

Santander has previously pledged to address weaknesses in its anti-money laundering systems, including a comprehensive restructuring of these operations in 2017.

The bank did not contest any of the findings from the investigation, the FCA said, and agreed to settle for a financial penalty of a little over £107.7M. If it had not settled, it could have faced a fine of almost £154M.

In a statement, Santander U.K. chief executive officer Mike Regnier said the bank apologized for the AML issues found in the FCA's investigation.

“While we took action to address our AML issues once they were identified, we accept that our AML framework at the time should have been stronger," Regnier added.

Madrid-listed shares in the wider Banco Santander (BME:SAN) group were down slightly in mid-day trading.

The fine is the latest in a string of actions taken against financial services firms by the FCA over their anti-money laundering practices. In December 2021, NatWest (LON:NWG) was hit with a £264.8M fine over failures to prevent alleged money laundering, while HSBC (LON:HSBA) was given an almost £64M penalty due to "serious weaknesses" in its AML operations from 2010 to 2018.