Due Diligence an essential component of successful business
There is an increasing need for businesses to conduct their own due diligence for reasons other than increasing business efficiency, reducing financial risk and protecting their reputation. The need to meet regulatory compliance is an essential component of successful business today and it is not something that is going to be relaxed anytime soon.
British financial authorities, the Financial Conduct Authority (FCA) have fined Standard Bank, the U.K. subsidiary of Standard Bank Group, £7.6 million pounds this month for shortcomings in its procedures regarding corporate customers with political ties, failing to carry out adequate safeguards to combat money laundering and had failing to check and monitor the relationships its corporate customers had with people holding, or close to those holding, prominent public positions – so-called PEPS (Politically Exposed People).
The FCA reviewed 48 Standard Bank corporate customer files between December 2007 and July 2011. It said all had connections with PEPs and highlighted “serious weaknesses” in how the bank applied its policies and procedures. “Banks are in the front line in the fight against money laundering,” said Tracey McDermott, head of the FCA’s director of enforcement and financial crime division. “If they accept business from high risk customers they must have effective systems, controls and practices in place to manage that risk. Standard Bank clearly failed in this respect.”
The case is the first anti-money laundering case brought by the FCA or its predecessor agency that focused on commercial banking activity. Regulators say that where corporate customers are known to be linked to a PEP, for example through a directorship or shareholding, banks need to increase due diligence because such customers are likely to pose a higher risk of financial crime.
Standard Bank, which cooperated with the FCA during the investigation, said measures introduced since 2010 included refreshing all active client files, conducting a compliance and business review and increasing resources to beef up its anti-money laundering compliance controls. It noted that the FCA had not suggested that the bank had ever handled the proceeds of crime.
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