Banking Scandals: New Cases

There is no end to the banking scandals. The new cases of AMR Bank, NatWest, and ING ITALIA. As British financial crime expert Graham Barrow puts it:

"If you can't understand where the money is coming from, you shouldn't accept the client."


International anti-money laundering legislation, firstly with the FATF-FAFT guidelines and then with the individual measures applied in the internal systems of the States, requires active cooperation by obliged professional entities, such as banking intermediaries, credit companies, trusts and now also Blockchain payment instrument operators, to provide financial police authorities with information regarding the financial transactions of their clients, to prevent the occurrence of international criminal offenses such as money laundering or more generally the commission of financial crimes.


After the major European scandals and the heavy penalties imposed on Deutsche Bank and Danske Bank, one would have expected a change in operations by the large multinational banks, but this did not happen. In particular, the major scandals have in common the failure to comply with anti-money laundering measures. In fact, the cases we are going to analyse concern the failure of the obliged parties to report (see SAR - Suspicious Activity Report) all those possible risk phenomena in a money transfer.


Chronicle Facts

The ING Bank Italia case is one of the recent money laundering cases and lesser amounts of laundered money than similar cases. It all started in October 2019, when letters rogatory were sent by telegram to the Court of Milan from a number of European countries, requesting further investigation into some anomalous money transfers which the foreign authorities thought to be the result of fraud; asking the Italian authorities to ascertain the role of ING BANK Italiana, whose registered office is in Milan. Inspections were launched by the Bank of Italy (Italy's leading financial and banking supervisory body) and the Guardia di Finanza (the Italian financial police force) appointed as the economic police unit. They discovered that the bank had indeed been acquiring customers since 2014 without paying due attention to the AML risk and the lack of procedures for identifying and documenting the customers of the business relationship. The inspection quantified 355 transactions with a profit of 7 million. A plea bargain was reached between the Court of Milan and ING Bank Italiana, which will end with the payment of a fine of 30 million.



The ABN AMRO Bank Case

ABN AMRO BANK is a Dutch credit institution (similar case to Danske Bank). In 2019, investigations had been initiated by the Dutch financial and judicial authorities regarding the opening of bank accounts to persons to whom AML procedures were not compliant. Still, nevertheless, they were given the opportunity to operate financially. The allegations raised relate to inadequate verification of capital transfers and insufficient customer knowledge. Although investigations are still ongoing, the authorities hold the board of directors responsible for the criminal act, for whose members individual criminal investigations have been initiated to determine responsibility for the failure to provide AML reports.



The Nat(ional) West(minter) Bank Case

The UK FCA- Financial Conduct Authority started investigating NatWest in 2017. Subsequently, in 2019, it appointed an auditor to verify the customer verification and anti-money laundering procedures' correctness. The NatWest bank case follows two dynamics, one internal the other external.


Starting with the external issues, it was discovered through the initiation of criminal judicial investigations that the bank allegedly had from 2011 to 2016 credit relationships with criminals wanted by the NCA police force including the trader Fowler Oldfield, who used his company as an international base to launder money. According to the investigators, the bank, which is 62.4% owned by the state, carried out suspicious transactions to the tune of 365 million, of which 264 million was in cash that was transferred daily from the bank to the company also in person. In fact, investigators were able to determine that up to £2 million was being transported in one day. On the domestic front, however, the industry regulators found significant procedural and enforcement failures in relation to anti-money laundering and customer identification. After these findings, the bank has sought in a few years to invest in internal control functions and risk assessment by bringing itself back in line with AML procedures and in mitigating financial risks, a function rendered mainly by the choices of the new CEO who took office in 2019, Alison Rose. The first appearance hearing is scheduled for La NatWest on April 14 to answer before the judges of the charges formally declared, which caused a financial loss of 3% in the stock market, in a period so already difficult due to the Covid pandemic. The fear is that its banking license will be revoked, something the FCA has repeatedly threatened to do, including in relation to cases of credit mismanagement. The following risk is the fear of a multimillion-dollar fine.


The Importance Of The Compliance Function

Although it becomes peculiar in each State system, the current corporate system provides that in each case, there are figures who are in charge of monitoring, mitigating, and correcting the presence of any internal and external risks that the company may incur or cause in the exercise of its activity. This function, thinking of a pyramid, has at the top the Board of Directors and its CEO, who daily check and prepare the necessary offensive countermeasures. It would be impossible for this to be done by one person alone, so the CEO gets help from the sector managers located in the different general offices, who daily inform and execute what the board of directors tells them. In turn, there are specific branches of the business and supervisory activity, such as Risk Management with its underlying branches, the Security Risk IT branch or Compliance, etc.


In the case in question, we find the Anti-Money Laundering function headed by the Compliance Department where we find within it the figure of the MLRO (Money Laundering Reporting officer) who constantly updates the higher bodies of the trend on risks and mitigations in the field of AML (Anti Money Laundering). As also expressed several times by the FCA itself, it is inevitable that all persons enrolled in specific professional registers and who hold important and managerial positions in a company must meet the requirements of Professionalism and Honourableness, under penalty of immediate dismissal for unsuitability to perform the required functions.


Written by Dimitri Barberini
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