By Simon Miller
Turkish Bank has been fined £294,000 for money laundering failings, the UK financial regulator announced today.
The Financial Services Authority (FSA) has fined Turkish Bank (UK) Ltd (TBUK) £294,000 for breaching the Money Laundering Regulations 2007 (MLR).
The breaches – which related to TBUK’s correspondent banking arrangements - were widespread and lasted over two and a half years and led to an unacceptable risk that TBUK could have been used to launder money.
This is the first time that the FSA has taken enforcement action against a firm in relation to money laundering weaknesses in its correspondent banking arrangements.
Under the MLR, providing correspondent banking services to banks based in non-EEA states is recognised as creating a high risk of money laundering that requires enhanced due diligence and ongoing monitoring of the relationship.
During this period, Turkey and Northern Cyprus did not have anti-money laundering (AML) requirements that were equivalent to those in the UK.
The FSA visited TBUK in July 2010 as part of a thematic review of how banks operating in the UK were managing money laundering risks. The visit gave serious cause for concern in relation to TBUK’s AML controls over correspondent banking.
TBUK’s breaches of the MLR included failing to:
o establish and maintain appropriate and risk-sensitive AML policies and procedures for its correspondent banking relationships;
o carry out adequate due diligence on, and ongoing monitoring of, the respondent banks it dealt with and failing to reconsider these relationships when this was not possible; and
o maintain adequate records relating to the above.
The regulator said that while not deliberate or reckless, "these failings were more serious because the FSA had previously warned TBUK of deficiencies in its approach to AML controls over correspondent banking".
Tracey McDermott, acting director of the Enforcement and Financial Crime Division, said: “Turkish Bank fell far short of the standards we expect of firms in managing their money laundering risks. This was despite clear warnings from the FSA that it needed to improve."
TBUK agreed to settle with the FSA at an early stage of the investigation. Without this early settlement and the firm’s co-operation, the fine would have been £420,000.