FCA brings money laundering charges against NatWest

The Financial Conduct Authority has launched criminal proceedings against NatWest for failing to comply with anti-money laundering rules, in the first attempted prosecution against a UK bank under the law.

NatWest faces a potentially unlimited fine after the FCA alleged it had failed to properly monitor the actions of a gold dealer.

The customer was Fowler Oldfield, a Bradford-based jewellery wholesaler that was shut down after a police investigation in 2016, according to a person briefed on the investigation. The FCA said the company paid £365m into its NatWest account in a series of increasingly large cash deposits between 2011 and 2016.

A judge in a court case heard in 2019 said the 122-year-old gold dealer was involved in “an extremely sophisticated” money laundering operation, with up to £2m in cash being delivered to the business each day.

The identity of the NatWest customer was first reported by Bloomberg.

The FCA launched an investigation into potential failures by NatWest in 2017. NatWest said it had co-operated with the investigation.

The bank, which is majority owned by the UK government after being bailed out in 2008, said it “takes extremely seriously its responsibility to seek to prevent money laundering by third parties and has accordingly made significant, multiyear investments in its financial crime systems and controls”.

Criminal money laundering cases carry an unlimited fine that the court can impose.

“This is potentially very serious, and not just because there is an unlimited fine,” said Jonathan Fisher QC, who specialises in money laundering cases. “It will send shivers of concern down the spines of those operating in the regulated sector whose anti-money laundering procedures are not 100 per cent.”

NatWest will avoid the nuclear option of having its banking licences revoked, however, which would have effectively shut down the business. A conviction carries the possibility of a business’s regulatory licences not being renewed, but the FCA has decided not to pursue this option, according to people briefed on the regulator’s thinking.

The FCA has long pledged to use its criminal money laundering powers but has not done so until now. The watchdog inherited the powers with which it charged NatWest in 2007.

“By taking this step despite years of co-operation by the bank, the FCA is demonstrating that, absent totally effective money laundering systems and controls, they are willing to prosecute,” said David Savage, head of financial crime investigations at Stewarts, the law firm.

Mark Steward, the FCA’s director of enforcement, has previously said the agency has a portfolio of “strong” money laundering cases. As part of its normal duty as a prosecutor, the FCA must consider that it has at least a 50-50 chance of securing a conviction at trial before it charges a person or entity.

It emerged in September that the FCA had scrapped seven of its 14 criminal probes into money laundering. In 2018 it downgraded a criminal probe into Credit Suisse and $2bn worth of so-called tuna bonds in Mozambique into a regulatory investigation.

NatWest is scheduled to appear in court next month.

No individual is facing criminal charges in the NatWest case but the rules allow for a maximum two-year sentence for individuals. 

In addition to the specific investigation that began in 2017, the FCA in 2019 separately appointed an external expert to review NatWest’s broader financial crime governance arrangements. That review is ongoing. 

NatWest had already been censured by the Financial Services Authority — the predecessor to the FCA — over money laundering failures a year before the alleged issues with Fowler Oldfield began.

Shares in NatWest fell almost 3 per cent in early trading on Tuesday, before pulling back to a 0.9 per cent decline by early afternoon.