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Violation Tracker UK Individual Case

Company: Standard Bank Isle of Man Limited
Penalty: £247,324
Year: 2022
Date: 7 January, 2022
Offence Group: financial offences
Offence Type: anti-money-laundering deficiencies
Violation Description: Standard operates procedures such that it can apply ‘locks' either against a specific client and / or specific accounts. Such ‘locks' and related controls are designed to, in certain cases, prevent transactions from being processed.  For this purpose these ‘locks' and related controls are referred to as “preventative controls”. The preventative controls that were applied at the time of the breach of the Court Order were such that they differed between transactions involving banking entities not related to Standard (“third party transactions”), and those banking entities related to Standard (“intragroup transactions”). The breach of the Court Order arose because of some weaknesses in the preventative controls pertaining to intragroup transactions. In addition to preventative controls, banks also operate what are commonly referred to as “detective controls”; these being designed to find issues quickly, including where preventative controls may have failed. In this case, Standard did not have adequate detective controls in place. This is evidenced by the fact that the breach of the Court Order occurred in September 2020 but Standard did not identify the breach until April 2021 whereupon the funds were promptly returned in full to the Restrained Accounts.  Further, Standard only identified the issue in April 2021 when the client requested a third party transaction. Standard acknowledges that the failings arose because of a weakness in its operational controls and systems of ‘locks' applied to customer accounts that are intended to ensure that monies cannot be moved from such accounts in particular circumstances. Standard also acknowledges that it did not have sufficient detective controls in place to identify the issue in a timely way. The failings resulted in a number of breaches of the Financial Services Rule Book 2016 (the “Rule Book”) by Standard, namely:- a breach of Rule 6.1 of the Rule Book in that Standard did not act with due skill, care and diligence in carrying on regulated activity; a breach of Rule 6.5 of the Rule Book in that Standard carried on business in a way likely to bring the Island into disrepute or damage its standing as a financial centre; and a breach of Rule 8.3(2) of the Rule Book. This Rule requires that â€œThe responsible officers of a licenceholder must establish and maintain appropriate internal and operational controls, systems, policies and procedures relating to all aspects of its business to ensure appropriate safeguards to prevent and detect any abuse of the licenceholder's services for money laundering, financial crime, the financing of terrorism, or the proliferation of weapons of mass destruction”.  Those same failings also resulted in Standard contravening paragraph 4(1)(a)(iii) of the Anti-Money Laundering and Countering the Financing of Terrorism Code 2019 (the “Code”) which requires Standard not to enter into or carry on a business relationship…unless Standard establishes, records, operates and maintains procedures and control in relation to internal controls and communication matters that are appropriate for the purpose of forestalling and preventing ML/TF. The matters above are considered by the Authority to be serious regulatory failings.
Agency: Isle of Man Financial Services Authority
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