NatWest was fined £264.7m by a London court on Monday after pleading guilty to failing to prevent a £365m alleged money laundering scheme that involved £700,000 being carried through a shopping centre in black bin liners.
The Royal Bank of Scotland subsidiary admitted three counts of breaching anti-money laundering rules between 2012 and 2016, marking the first criminal prosecution of a UK lender by the Financial Conduct Authority. The fine was expected to be up to £340m but credit was given for NatWest’s guilty plea. The judge also ordered the bank to repay £460,000 to cover any financial benefit it gained from the criminal activity and costs of £4.2m.
Justice Sara Cockerill highlighted the “glaring nature” of NatWest’s failures. “Without the bank — and without the bank’s failures — the money could not be effectively laundered,” she said. The government-owned bank was fined for failing to adequately monitor its business relationship with Fowler Oldfield, a Yorkshire gold trader that became a NatWest customer in 2011.
At the sentencing hearing, the FCA’s counsel, Clare Montgomery QC, described how £365m was deposited in the NatWest accounts of Fowler Oldfield over a five-year period, including £264m in cash that at one point came in at a rate of £1.8m a day.
Montgomery said cash was paid into 50 branches, including a £700,000 deposit carried through a West Midlands shopping centre in black bin liners. Staff had to repackage the cash in hessian bags because the bin liners were breaking, and the floor to ceiling safes were full, she told the court.
NatWest assisted an operation by West Yorkshire police and notified the FCA in 2016. A suspicious activity report (SAR) was raised about a Fowler Oldfield customer, a supplier of hair extensions who received £387,000 from the gold dealer, but no SAR was raised about the gold dealer itself.
Montgomery said concerns were raised about the deposits, including by one senior employee at NatWest’s Basingstoke cash centre who described the transactions as the “most suspicious” he had seen during his career.
The court heard that staff at a NatWest cash centre had complained the large quantities of cash being deposited had a “prominent, musty smell, indicative of long storage, rather than business use” and had alerted the bank about the quantity of Scottish banknotes it was handling.
No action was taken by the bank until West Yorkshire Police raised concerns about Fowler Oldfield.
Montgomery told the court that Fowler Oldfield was misclassified for a period of time as a medium-risk business and at one point as a low-risk customer and was not reviewed annually.
John Kelsey Fry QC, acting for NatWest, said the bank expressed its “deep regret”, and its chief executive and chair had written a letter of apology to the court.
Describing the facts of the case as “startling”, he said anyone was “entitled to ask — how can they have possibly missed all this?” “They didn’t miss it,” he said. “It was identified and subjected to scrutiny . . . the quality and adequacy of that scrutiny is another matter.”
The FCA has long pledged to use its criminal money laundering powers, which it inherited in 2007, but has not done so until now.
Mark Steward, executive director of enforcement and market oversight at the FCA, said: “NatWest is responsible for a catalogue of failures in the way it monitored and scrutinised transactions that were self-evidently suspicious.”
He added that the failures were “intolerable ones that let down the whole community, which, in this case, justified the FCA’s first criminal prosecution under the Money Laundering Regulations”.
NatWest’s chief executive Alison Rose said: “We deeply regret that we failed to adequately monitor one of our customers. While today’s hearing brings an end to this case, we will continue to invest significant resources in the ongoing fight against financial crime.”
NatWest has said it has invested almost £700m since 2016 to upgrade its transaction monitoring systems, automated customer screening and client due diligence, and planned to spend a further £1bn over the next five years. The bank added it now had more than 5,000 staff in specialist anti-financial crime roles.
Additional reporting by Laura Noonan
NatWest fined £265m for money laundering failures
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