Angelika Hellweger of financial crime specialists Rahman Ravelli details action taken against a firm for its money laundering shortcomings
The British broker ADM Investor Services International has been fined £6.4 million for inadequate anti-money laundering (AML) systems and controls.
The fine was issued by the Financial Conduct Authority (FCA), which said that the nature of ADM's business posed a potentially high risk of money laundering. This was, according to the FCA, because of ADM's business model, the geographical location of its customers, and the proportion of its business that involved high-risk clients; including politically exposed persons.
The FCA first raised concerns with ADM nine years ago after it noticed the company did not have a formal process for classifying customers by risk.
It expected ADM to put right its problems but two years later the FCA found that there were still "significant failings'' at the company. ADM's AML customer risk assessment was found to be basic and did not enable an examination of a customer's financial crime risk. ADM did not conduct a firm-wide money laundering risk assessment and there was little evidence of adequate on-going monitoring in the form of periodic customer reviews. ADM's policies were also outdated as they referred to regulations which were around 12 years out-of-date.
After the FCA's 2016 assessment, ADM agreed to a set of conditions - including not taking on business from high-risk customers. By the end of October 2016, ADM had introduced AML policies and procedures to address the FCA's concerns. After further measures were introduced, the FCA lifted the conditions in 2018.
In announcing the fine, the FCA acknowledged that ADM's failings were historic and that the company had taken remedial action to address the problems that had been identified.
The FCA's Joint Executive Director of Enforcement and Market Oversight, Therese Chambers, said: "All financial firms need to have effective anti-money laundering checks in place. ADM Investor Services' failures put it at risk of being used to facilitate financial crime. These failings continued even after the firm had received clear warnings on the need to improve its systems.''
This statement is an important reminder that regulators' concerns need to be addressed promptly and comprehensively when they are raised in order to avoid more drastic actions in the future. Firms need to constantly review their own assessments, update their policies and close any gaps.
ADM did not dispute the FCA's findings. By agreeing to accept the FCA's findings, the company qualified for a 30% settlement reduction of its fine, which would otherwise have been £9,243,738.
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