The UK Financial Conduct Authority (FCA) has decided to impose a civil penalty of £1,584,100 on Gatehouse Bank plc pursuant to section 42(1) of the ML Regulations.

Gatehouse agreed to resolve this matter and qualified for a 30% (stage 1) discount under the Authority’s executive settlement procedures. Were it not for this discount, the FCA would have imposed a financial penalty of £2,263,084.

The Authority found serious shortcomings in a number of areas of Gatehouse’s AML policies and procedures in the period from 9 June 2014 to 5 July 2017, thereby breaching provisions of the Money Laundering Regulations 2007:

• customer due diligence to verify the identity of its customers, including those who have a beneficial interest in the customers, to establish and adequately scrutinise the source of their wealth and funds;
• enhanced due diligence of customers that pose a higher risk of money laundering or terrorist financing, such as those who were domiciled in high risk jurisdictions or were politically exposed persons;
• ongoing monitoring of its customers throughout their relationship with Gatehouse, particularly in respect of ensuring that customer due diligence and enhanced due diligence information was kept up-to-date and reflected the current level of financial crime risk presented by each customer; and
• internal controls that should have allowed Gatehouse to rectify the abovementioned shortcomings in an orderly and timely manner; in particular the compliance function was under-resourced. Also, although Gatehouse had adopted a three lines of defence model, this did not operate effectively, meaning that front line relationship managers did not appropriately screen customers, and an overburdened Compliance function was left to remedy deficiencies in the quality of due diligence information collected.

In deciding to impose a civil penalty on Gatehouse, the regulator has taken into account the fact that Gatehouse has taken steps to remedy the deficiencies in its AML controls and co-operated with the Authority.

In particular, between June 2014 and August 2016, Gatehouse undertook a compliance review to remediate customer files. Gatehouse invested in improving its AML systems and controls, including engaging external consultants to assist it and to advise on the overhaul of its AML systems and controls. From mid-2016 to mid-2017, Gatehouse established and implemented a new suite of AML and financial crime related policies and procedures which addressed the deficiencies.