Santander fined £107.7 million for repeated anti-money laundering failures

On 9 December 2022, the Financial Conduct Authority (FCA) fined Santander UK £107,793,300 for repeated anti-money laundering failures.

It’s always surprising when big banks are at the receiving end of the regulator’s wrath. But it goes to show that no financial institution is safe from non-compliance – no matter how large or well-established the organisation is.

This blog explores the definition of anti-money laundering, the key takeaways from Santander’s incident and how regulatory technology can be leveraged to prevent anti-money laundering non-compliance.

What is anti-money laundering?

“Anti-money laundering (AML) refers to the web of laws, regulations, and procedures aimed at uncovering efforts to disguise illicit funds as legitimate income” – Investopedia.

The regulations around AML were first introduced as a response to the ever-growing financial industry. In 2020, it was estimated that the annual money laundering flows at $1.6 trillion, accounting for 2.7% of global GDP.

The most common AML regulations include the Bank Secrecy Act (1970) and Know Your Customer (KYC).

Santander’s AML failings – the key takeaways

The FCA has noted that Santander was aware of its AML system weaknesses and controls and began improvements in 2013. These changes led to some improvements but did not “adequately address the underlying weaknesses.”

The firm failed to adequately manage its AML systems for five years between 31 December 2012 and 18 October 2017, affecting the accounting oversight of more than 560,000 business customers.

The FCA cited that Santander’s AML systems were ineffective and did not properly verify customer information.

Several business banking accounts were overlooked. For example, a small business that had an expected monthly deposit of £5,000, was receiving millions in just six months and transferring funds to separate accounts.

The bank’s AML team had suggested that this account be closed down in March 2014, however, because of “poor processes and structures” the bank only proceeded to take action over a year later in September 2015.

The FCA also discovered various other business accounts that were “open to serious money laundering risk” as well as examples of the bank failing to deal with accounts associated with “suspicious activity, such as automated monitoring alerts.”

In total, these failures led to an estimated £298 million passing through Santander before the account was closed. The FCA had also previously fined Santander £102.2 million for poor AML systems in 2018.

Mark Steward, Executive Director of Enforcement and Market Oversight at the FCA, said, “Santander’s poor management of their anti-money laundering systems and their inadequate attempts to address the problems created a prolonged and severe risk of money laundering and financial crime. As part of our commitment to prevent and reduce financial crime, we continue to take action against firms which fail to operate proper anti-money laundering controls.”

Santander UK is continuing to improve its AML procedures through “ongoing transformation and remediation.”

How can regulatory technology prevent money laundering?

Money laundering and terror financing get consistently more intelligent to keep up with the pace of technological advancement. Financial institutions can adopt regulatory technology to ensure that their policies are AML-compliant to prevent money laundering.

By meeting regulatory obligations as per AML and KYC, banks can ensure that their systems are robust enough to withstand wrongdoings.

Regulatory technology such as CUBE’s Automated Regulatory Intelligence can ensure full compliance with AML and address AML vulnerabilities in existing systems.

These are just some of the reasons to deploy RegTech to fight financial crime:

• Close gaps in AML and KYC compliance frameworks
• Gather data needed for Customer Due Diligence (CDD) and Enhanced Due Diligence (EDD) based on existing policies to verify identities
• Automate customer checks, leaving less room for error
• Implement effective, auditable compliance – Provide evidence to regulators and internal audit teams across the entire regulatory change process.
• Avoid non-compliance enforcement actions – Preserve company reputation and avoid regulatory fines, data loss, financial loss, reputational harm
• Horizon scanning – Gain oversight over upcoming AML regulations and plan ahead when it comes to regulatory policies and controls.

Keep ahead of emerging AML and KYC regulations by speaking to CUBE.