NatWest fined £265 million for failing to stop £365 million money laundering operation

NatWest has today been fined £265 million for failing to stop a gold-dealing gang laundering nearly £400 million through its branches in what is the first criminal money laundering case against a British bank.

The Financial Conduct Authority (FCA) said Bradford jeweller Fowler Oldfield – which was liquidated in a police raid in 2016 – deposited £365 million with the bank over a five-year-period, including £264 million in cash.  

The gang used up to 50 branches of NatWest to launder its money according to FCA prosecutors, with at least one individual outlet receiving more than 40 million pounds. 

One person in Walsall arrived at a branch with so much cash in bin liners – 700,000 pounds – that they broke and the money had to be repacked in hessian bags, the FCA’s lawyer Clare Montgomery said, adding the cash also did not fit in the branch’s floor-to-ceiling safes.

NatWest, part of the Royal Bank of Scotland group, in October pleaded guilty to three offences under the Money Laundering Regulations 2007, between 2012 and 2016.

NatWest is Britain’s biggest business bank and is still majority taxpayer-owned after a state bailout during the financial crisis of more than £45 billion. 

Mrs Justice Cockerill at Southwark Crown Court on Monday fined the bank £264,772,620, ordered it to pay £4,297,466 in costs and made a £460,047 confiscation order.

It is the first time a financial institution has faced criminal prosecution by the Financial Conduct Authority (FCA) under anti-money laundering laws in the UK. 

‘Throughout the indictment period it is accepted NatWest sought to discharge its obligations under the regulations and that it failed to do so,’ the judge said. 

‘Although in no way complicit in the money laundering which took place… without the bank’s failings the money could not have been laundered.’

Fowler Oldfield’s predicted annual turnover was £15 million when first taken on as a client by NatWest in 2011, but £365 million was deposited over five years.

The company, which was shut down following a police raid in 2016, was initially marked as ‘high risk’ but downgraded in December 2013.

At the height of the money laundering operation, as much as £1.8 million was being deposited in cash daily, and the customer became NatWest’s most lucrative in the area, Montgomery said.

Couriers walked through the streets of British towns carrying bags of cash they then deposited at the bank’s branches before the scheme was busted by police, the FCA told the judge.

The FCA said NatWest failed to properly investigate numerous warnings generated by its financial crime systems, miscategorised the customer as lower risk than it was, and staff investigating the warnings lacked sufficient experience and knowledge.

One rule designed to flag suspicious activity was disabled by NatWest because it created too many alerts, ‘so the bank decided it should be deactivated’, Montgomery said.

The National Crime Agency (NCA) at one stage raised concerns at the sheer quantity of Scottish bank notes being deposited many miles away in England, which it said was an indicator of potential crime, while one of the bank’s cash centres in Washington, north-east England, said the notes had a ‘musty smell’ indicative of storage.

One person working at a NatWest Basingstoke cash centre who was close to retirement warned the activity was the most suspicious he had seen in his career, but the financial crime manager took the view there were ‘macroeconomic reasons’ for the spike in cash deposits.

‘How could they possibly have missed all this? That would be a perfectly reasonable question. To which the answer is, they didn’t miss it,’ John Kelsey-Fry, lawyer for NatWest, told the court.

‘The protections in the bank actually worked to the extent that the relevant activity was identified, it was highlighted. It did not escape the bank’s systems, it did not go under the radar. 

‘The quality and adequacy of that scrutiny is another matter.’

The relationship manager who was responsible for the suspect account was dismissed, but not due to any suggestion of complicity in illegal activity, Kelsey-Fry said.

‘He got so close that he lost his sense of perspective and judgement, and was completely taken in.’

Fowler Oldfield was the subject of a total of 11 internal money laundering reports and 10 automated transaction monitoring alerts, the court heard. 

And a suspicious activity report (SAR) was made in relation to one of Fowler Oldfield’s customers, a company involved in hair extensions, which received £307,000 from the jewellers.

But Montgomery said: ‘So far as each of those reports were concerned, none of them led to an SAR being filed.’

She said staff at the Borehamwood office, who dealt with the bulk of the reports, were more concerned with closing them within a 30-day timeframe than properly investigating.

The court heard NatWest has invested £700 million to tackle financial crime with another £1 billion earmarked over the next five years.

But Ms Montgomery said there are ‘still concerns on behalf of the FCA’, with the completion date for one programme pushed back from 2020 to 2023. 

Last year, NatWest’s chief executive Alison Rose spoke of her ‘deep regret’ over the scandal that has tarnished the bank’s reputation and incurred the massive fine that will dent their own balance sheet.