UK broker faces £6.4m fine for ‘serious’ AML failures

British broker ADM Investor Services International has been hit with a £6.4 million fine over "serious failings" in its financial crime controls.

The Financial Conduct Authority (FCA), which issued the penalty, said that the nature of the company’s business and client base presented potentially high levels of money laundering risk because of its business model, the geographical location of its customers, the proportion of its business involving high-risk clients, and because it had had politically exposed persons as clients.

The regulator first raised concerns with the broker in 2014, when it identified the absence of a formal process to classify customers by risk.

The UK watchdog expected the business to make improvements but found during a 2016 visit to the firm that there were still "significant failings".

In particular the firm’s AML customer risk assessment was basic and did not enable an assessment of a customer’s financial crime risk and it did not conduct a firm-wide money laundering risk assessment.

The organisation also found that there was little evidence of adequate on-going monitoring in the form of periodic customer reviews and policies were outdated and referred to old legislation.

After the visit, the company agreed to a set of requirements, including one to not to take 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 remedial action, the requirements were lifted in January 2018.

Senior research fellow at the Centre for Financial Crime and Security Studies (CFCS) Kathryn Westmore, part of the Royal United Services Institute (RUSI), said that given its been six years since the problems identified by the FCA were resolved, there were probably a lot of "behind the scenes" discussions happening.

“The Final Notice contains a comprehensive list of failures by the firm, continuing well after they were first told that they were under scrutiny from the FCA,” Westmore told FStech. “Almost every aspect of the firm's AML systems and controls was found to be inadequate and it's clear that the firm did not initially respond to the FCA's concerns as fast or effectively as they should have”.

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