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The UK’s Financial Conduct Authority (FCA) has fined GTBank UK, which specialises in trade finance and correspondent banking for clients in Africa, £7.6mn for widespread and long-running failures in its financial crime controls.

The FCA says GTBank UK had “serious weaknesses” in its anti-money laundering (AML) controls between October 2014 and July 2019, including a failure to properly monitor transactions, holding incomplete information about customers, improper risk classification and failures in record-keeping.

The lender, a British subsidiary of one of Nigeria’s largest banking groups, also failed to fix AML shortcomings previously identified by the FCA, including when it was fined £525,000 in 2013, which the regulator says made the latest infraction “especially egregious”.

“GTBank should have acted quickly to put in place adequate AML controls following its fine in 2013 but it failed to do so,” says Mark Steward, the regulator’s director of enforcement and market oversight. “GTBank did not develop a plan that was capable of addressing its AML weaknesses, exposing it and the broader market to financial crime risks for a prolonged period.”

“Firms must protect themselves and those dealing with them from financial crime risks, especially money laundering,” Steward says in a statement. “The FCA is determined to ensure the market for financial services is safe, clean and trusted with robust systems and controls in place to stymie financial crime. The FCA will continue to take action when these standards are not met.”

In 2021 the regulator, alongside the Prudential Regulation Authority, penned a letter to CEOs of trade finance providers demanding better financial crime and credit risk controls in the wake of then-recent failures in the commodities and trade finance sector. A Freedom of Information request by GTR in October 2021 revealed that the FCA had three open investigations relating to trade finance under AML regulations.

The fine is more than GTBank UK’s entire operating income of just over £7mn stated in its most recent financial accounts, for the 2020 calendar year, when the bank chalked up a loss of around £2mn following several consecutive years of profits.

Gbenga Alade, GTBank UK’s managing director, says in a statement that “as a responsible financial services institution that is committed to best practices, GTBank UK takes its AML obligations extremely seriously. We note with sincere regret the FCA’s findings regarding AML control gaps in our operations in the past and we are very sorry for this.”

“We would like to assure all our stakeholders and the general public that necessary steps have been taken to address and resolve the identified gaps,” Alade continues.

“Whilst there was no direct customer impairment arising from the period under review and the FCA’s findings do not include any instances of suspected money laundering, we have since reinforced our AML control framework and implemented changes in our AML processes in line with best practice with a view to ensuring that the highest standards are maintained in our operations.”

The bank received a 30% discount from the FCA’s initial calculated penalty because it agreed to settle with the regulator.

GTBank UK specialises in trade finance, correspondent banking and mortgage products with a focus on African counterparties and Africans who have business connections to the UK, according to the FCA and the bank’s accounts.

The lender’s trade finance offering includes guarantees, letters of credit, discounting and documentary credits, according to its website, although it recorded income from its trade finance business of just £202,000 in 2020. Revenues were likely hit by an FCA ban, from late 2018 to mid-2021, on the bank either taking on new customers or providing new products to existing clients.

Its accounts for 2021, which were due to be filed with Companies House on December 31 last year, are overdue and the bank did not respond when asked when they will be published.

 

‘Significant deficiencies’

Following visits to assess GTBank’s financial crime controls in 2014 and 2017, which identified weaknesses in several areas, the FCA compelled the bank to appoint an external “skilled person” to review its financial crime governance and systems and the effectiveness of the bank’s proposed remediation efforts, according to a January 10 notice published by the regulator.

The skilled person’s report found “significant deficiencies” including in its AML framework, adherence to its risk appetite, documentation gaps even in customer files that had been recently subject to a “look back” exercise, failures to comply with its internal periodic customer review process and ineffective escalation of suspicious activity.

In one example included in the notice, a customer risk assessment recorded an individual client’s alma mater as the “University of Life, Nigeria”, which the regulator drily pointed out “is not a recognised formal institute of higher education”.

The FCA notice says that GTBank’s culture of prioritising new business over carrying out “appropriate” customer due diligence was a significant factor in the lender’s ongoing failures even after the 2013 fine and the FCA’s 2014 visit.

“There was a lack of sufficient understanding within the customer facing teams of what was required of them,” the FCA says, which “was further exacerbated by a culture whereby the customer-facing teams did not consider key AML tasks, such as undertaking a risk assessment and obtaining the necessary due diligence information, to be their responsibility”

Steps taken to improve this approach “were insufficient, resulting in persistent disregard for processes and procedures throughout the relevant period”, according to the notice.

“This was one of the root causes of many of the ongoing due diligence failings within GTBank during the relevant period and is particularly serious given that the customer facing teams were GTBank’s first line of defence against money laundering risk and held ultimate responsibility for assessing the financial crime risk posed by prospective customers.”

A programme to identify and remedy deficiencies in more than 1,100 customer files was not sufficiently resourced or given backing by senior management, according to the notice. For a period between the use of two automated transaction monitoring systems, the bank’s oversight of transactions was completely manual, it adds.

The FCA also rebuked the bank’s senior managers, finding the bank breached two rules relating to senior management arrangements, systems and controls. The lender’s top brass “failed adequately to address AML deficiencies and weaknesses and address the root causes of these issues” according to the FCA notice.

When challenged by their own board’s risk and compliance committee, management “often reassur[ed] the [committee] that issues had either been resolved or were being addressed when this was not the case”.

“The Authority considers this repeated misconduct to be a direct result of the inability of the senior management within GTBank, over a prolonged period of time, to formulate and implement an effective plan capable of addressing the weaknesses identified within its AML and financial crime systems and controls,” the notice says.