Bangladesh’s Sonali Bank UK branch fined £3.3 million for anti-money laundering failings

Britain's Financial Conduct Authority (FCA) has fined the Bangladesh government-owned Sonali Bank 3.25 million pounds ($4.04 million) for failing to control its British clients for possible money laundering, media reports say.

The FCA on Wednesday said Sonali Bank (UK), 51 percent owned by the government, had "serious and systemic weaknesses" at almost all levels of its anti-money laundering control structure, Reuters reported.

Regulators worldwide have in recent years been stepping up efforts to enforce better money-laundering controls on banks, following a series of high-profile failings at major lenders.

A BBC report said the bank’s operations in the UK were also banned from accepting deposits from any new customers for 24 weeks.

Apart from the ban and fine, the report said, the bank’s top anti-money laundering official, Steven Smith, was banned from any similar job in banking.

But its main business, remitting cash to the people in Bangladesh, is unaffected, added the BBC report.

It said Sonali Bank, the largest nationalised commercial bank of Bangladesh, currently has three branches in Britain - in London, Birmingham and Bradford – which aim at serving the expatriate Bangladeshis.

The FCA said their investigation had found that the bank's failure to operate proper controls against potential money laundering had taken place despite previous warnings from the regulator as long ago as 2010.

"Sonali Bank failed to maintain adequate anti-money laundering (AML) systems between 20 August 2010 and 21 July 2014," said the regulator.

"The FCA found serious and systemic weaknesses affected almost all levels of its AML control and governance structure, including its senior management team, its money laundering reporting function, the oversight of its branches and its AML policies and procedures.

"This meant that the firm failed to comply with its operational obligations in respect of customer due diligence, the identification and treatment of politically exposed persons, transaction and customer monitoring and making suspicious activity reports," the FCA added in its statement.

The bank had also failed to tell the FCA for at least seven weeks of an allegation of "significant fraud" against a client, says the BBC report.

Investigations revealed the client's annual income to be £28,000, but he had remitted £25,000 to Bangladesh in 18 months.

FCA said the bank's board and senior management were criticised for failing to take the requirements of the anti-money laundering rules sufficiently seriously.

Steven Smith, the bank's money laundering reporting officer, was personally fined £17,900, says the BBC.

Despite the fact that he had been overworked, the regulators found that Smith was responsible for failing to heed warnings from the bank's own internal auditors.

The FCA said he also failed to put proper AML controls in place; did not notice that bank staff were unaware of what to do about money laundering; told his own board and senior management that controls were working when they were not; and failed to recruit more staff when he should have done so.

The BBC reported that Sonali Bank announced last December it would stop taking on any new non-business customers and will operate only two branches by the end of this year.

The FCA said the bank had agreed to improve its AML procedures, including taking on new senior staff, using outside experts and giving staff refresher training.

Speaking to bdnews24.com Sonali Bank UK Chief Executive Sarwar Hossain admitted to 'management failure, especially in IT.'

Asked over the impact of the 24-week ban on accepting new clients, he said, "Not that much as we have few depositors. Very few people come here to open an account."

Sonali Bank started its UK operation just after Bangladesh's independence in 1971.

It was shut down in 1999 on charges of irregularities, but was permitted resume operations two years later.