Vigilance and Enrichment: A Difficult Combination to Maintain

Europe is once again at the center of a new anti-money laundering banking scandal. In fact, the Spanish Supreme Court, the Cassation, as the highest court of law for civil and criminal matters, has recently fined Banco Santander €5.6 million for non-compliance with the AML/CFT rules according to the current AMLD sanctions profiles and the 40 FATF recommendations. In 2013, after several reports, the anti-money laundering service Sepblac (Servicio Ejecutivo de la Comisión de Prevención del Blanqueo de Capitales e Infracciones Monetarias de España, Financial Intelligence Authority - FIU, Spain) intervened and, after a series of searches and internal investigations, uncovered 143 accounts with high-risk profiles for which adequate AML/CFT checks were not carried out, as required by current regulations. For these anomalies, SEPBLAC imposed a penalty of €10.5 million, considering that there had been many severe and essential violations of some international AML/CFT recommendations. 


The initial penalty was commuted for six violations of the AML/KYC/CFT systems, subsequently, in the various court sessions between the bank's legal department and the State Attorney's Office, 4 of the six violations recognized by SEPBLAC were rejected, ultimately identifying only three violations, which were then confirmed by the Court of Cassation (€5.6 million). In addition, the entire criminal liability of the legal entity (company), in this case, the bank, was initially also charged. Still, in subsequent appeals and levels of judgment, it was reduced to the criminal liability of only a few members of the Bank's Governance and Compliance top management and no longer of the entire banking group.


 The reasons for the violations detected by SEPBLAC relate to a lack of or insufficient identification of some real holders/clients of the bank above accounts (184), such as: failure to obtain information on the purpose and nature of the business relationship,' 'violation of the obligation to identify the real holder' and 'the obligation to communicate any information. These procedures, checks, and modalities are not only an obligation, especially when there are high-risk indicators, but also a regulatory requirement as required by the legislative acts: 'Ley 10/2010', and AMLD 4 and AMLD5. 


This is what the entity has accepted in this process. Banking sources consulted in this way indicate that "the procedure shows a difference of interpretation on the definition of the degree of evidence required for the SAR." In addition, they add, "these are accounts opened in the name of financial entities that are themselves subject to money laundering prevention obligation so that the correct identification of clients was ensured." 


After the Supreme Court ruling, the bank indicated in an official statement that it reaffirms "its commitment to detecting and preventing financial crime and money laundering, and is scrupulously adhering to its regulatory obligation to file suspicious activity reports with the regulatory authorities and to make up for any shortcomings that the authorities may find outside." 


The European Court of Auditors recently warned that current anti-money laundering measures are "insufficient" in the banking sector. Yet, looking at the international panorama of banking scandals of the last decade or so, it seems that it is convenient for banks to risk, incur penalties and pay. This is because they know, or take for granted, that the profit is greater than the damage. 


The banks are very willing to enter into negotiations with the states or file appeals in court; they know that there are very long court proceedings and that, in all likelihood, the case will be decriminalized, perhaps the violations will be reduced, the penalties or the costs to be paid will be reduced. 


Recently, the annual accounts of a number of banks have been published, which, despite the current delicate health period of the covid-19 pandemic, have seen their balance sheets swell with some significant figures of billions of dollars. Santander bank, in particular, posted a profit of 23 billion in the first half of the year, due to digitalization, investment, cutbacks (economic and redundancy), and growth in European and national GDP, all of which contributed to this positive result. 5.6 million in eight years for a penalty compared to six months with a profit of 23 billion; there is no comparison. It's worth it! 


Finally, to mention the damage, the reputational "slap" experienced by SEPBLEC, as a Financial Intelligence Authority, which is highly respected nationally and internationally for its significant role in combating AML/CFT.


Written by Dimitri Barberini

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