The Financial Conduct Authority (FCA) has fined Commerzbank London £37.8 million over failures to put Anti-Money Laundering (AML) systems and controls in place.

The regulator said the penalty levied on the German bank’s London branch related to failures to take action on AML and controls between October 2012 and September 2017.

The FCA said that Commerzbank London was aware of these weaknesses and failed to take reasonable and effective steps to fix them despite it raising specific concerns about them in 2012, 2015 and 2017.

It stressed that firms operating in the UK - including branches of overseas firms - must take reasonable care to organise and control their affairs responsibly and effectively, and to establish and maintain an effective risk-based AML control framework.

The FCA’s investigation identified failings in a number of areas, including Commerzbank London’s failure to:

• Conduct timely periodic due diligence on its clients, which resulted in a significant number of existing clients not being subject to timely know-your-client checks. By 1 March 2017, 1,772 clients were overdue updated due diligence checks. A material number of these clients were able to continue to transact with the bank’s London branch due to the implementation of an exceptions process, which was not adequately controlled or overseen and which became 'out of control' by the end of 2016;

• Address long-standing weaknesses in its automated tool for monitoring money laundering risk on transactions for clients. For example, in 2015 Commerzbank London identified that 40 high-risk countries were missing - and 1,110 high-risk clients had not been added - to the transaction monitoring tool; and

• Have adequate policies and procedures in place when undertaking customer due diligence on clients.

As a result, Commerzbank breached the FCA’s Principles for Businesses, which require firms to have adequate risk management systems in place.

Since then, Commerzbank London has undertaken a significant remediation exercise to bring its AML controls into compliance, the FCA said, adding that a skilled person has been testing the effectiveness of these enhancements, and their work is now complete.

The bank has conducted an extensive look-back exercise to identify suspicious transactions during the period in question, and also voluntarily implemented a wide-ranging business restriction, which included temporarily stopping taking on new high-risk customers and suspending all new trade finance business activities.

Commerzbank London agreed to resolve the matter at an early stage of the investigation and therefore qualified for a 30 per cent discount. Without the discount, the financial penalty would have been £54 million.

FCA executive director of enforcement and market oversight, Mark Steward, said: “Commerzbank London’s failings over several years created a significant risk that financial and other crime might be undetected. Firms should recognise that AML controls are vitally important to the integrity of the UK financial system.”

Commerzbank has cooperated fully with the Financial Conduct Authority (FCA) to mitigate any potential compliance risks promptly and appropriately.

A spokeperson for Commerzbank highlighted the fact that the FCA investigation had found no actual financial crime.

"The FCA investigation relates to the time period of October 2012 to September 2017. The Bank has successfully remediated and addressed the deficiencies that were the subject of the investigation. During this period of remediation, Commerzbank has implemented new and enhanced anti-money laundering systems, processes and controls," they said.

The spokesperson added: "The Bank has taken the findings of the regulator very seriously. Commerzbank London has therefore undertaken a significant remediation exercise. Commerzbank is committed to ensuring that our business fully complies with the regulatory requirements. This has the highest priority at the Bank."

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