Having worked in the industry for several years, I am aware that some senior managers take calculated risks and ignore glaringly obvious money laundering activities for profit. In some cases, relationship managers (RM), senior managers and board members deliberately ignore the MLRO’s advise and do as they wish, all in the name of profit and commission.
In my view, the pressure on senior managers from shareholders to turn a profit is the single most significant driver for continuous bank failings to monitor appropriately and effectively detect and report financial crime. This is a very real and present danger to the successful tackling of dirty money across the globe.
This is what occurred with HSBC. Already an enormous international bank, it took the decision to grow even bigger. The decision was catastrophic. While HSBC management was busy making acquisitions and doubling the size of the workforce, in one corner of the world, in Mexico, unscrupulous customers exploited the system and the bank facilitated the laundering of billions of dollars, drugs money, by the Sinaloa cartel headed by the notorious El Chapo. Safeguards that should have been applied against money laundering simply were not. Was this deliberate? Hmmm… The bank was hit with a $1.9 billion penalty which was a US record, but it amounted to only five weeks’ worth of the bank’s profits. No HSBC banker was charged over what, arguably, was a more clear-cut, egregious episode.
A more recent example is the NatWest bin bag of cash episode which led to NatWest being fined 265 million pounds ($350.9 million) for failing to prevent the laundering of nearly 400 million pounds, in the first criminal money laundering case against a British bank. As a former MLRO, I find it utterly unbelievable that this went on at the Bank for so long and senior managers were not aware of it.
In light of the NatWest case, it is evident, that the regulators in the UK are fully committed to achieving a system that is fit for purpose. In addition, regulators have conducted (and continues to conduct) thematic reviews across the UK in this regard. However, in addition to these efforts, I would recommend the following actions going forward for a more effective approach:
1. A joined-up approach between the various professional agencies including for example the Association of Chartered Certified Accountants and the Law Society etc along with law enforcement agencies to drive efforts forward more effectively.
2. Senior managers and shareholders should be held more accountable for their actions and contributions (or lack thereof) to the ineffective management of financial crime risk within their organisation. Name and shame would be a good start.
3. Investment in resources to investigate and prosecute wrongdoers. Criminal prosecution against wilfully negligent RMs, senior managers (not just the MLRO) and shareholders should be followed through with conviction and corresponding prison term and not just fines.
I am fully persuaded that a couple of examples of RMs CEOs COOs and Board chairs found guilty of criminal wrongdoing and sentenced to prison following an enforcement action will send a strong message. I am aware of the complex nature of these criminal trials and the required burden of proof however; I believe the entire process can be reviewed and simplified for speedy and appropriate outcomes.