Lessons Learnt from the NatWest case: How Credit Unions can avoid similar prosecutions

As a regulated sector, Credit Unions are subject to the risks of being vulnerable to financial crimes. This only increased as between 2011 and 2020 membership and loans increased by 41% and 71% respectively and deposits and assets by 135% and 127% respectively.

To prevent these risks Credit Unions are authorised by the Prudential Regulation Authority (PRA) and regulated by the PRA and the Financial Conduct Authority (FCA). These are the same regulators that supervise Banks and Building societies.

In our latest blog, AML and Credit Union experts at SmartSearch explore the consequences of not complying with FCA and PRA regulations as seen in the NatWest case which was the first criminal prosecution of a financial institute by the FCA. Dryden also explores how SmartSearch can ensure compliance for Credit Unions, avoiding the risk of being involved in financial crime.

NatWest’s fine of £264,772,619.95 for failing to comply with money laundering regulations and enabling £365 million to be ‘washed’ by a single customer, should be wake-up call for all regulated businesses, warns anti-money laundering experts SmartSearch.

John Dobson, CEO of the AML platform says that the NatWest case - the first time a financial institution has faced criminal prosecution by the Financial Conduct Authority (FCA) under anti-money laundering laws in the UK - should be a stark warning for regulated firms that the FCA is serious about cracking down on those not meeting their obligations, and is not afraid to dish out huge fines for non-compliance.

He said: “You hear a lot about the increasing threat of money laundering, and how all regulated businesses need to employ the most sophisticated AML procedures in order to identify fraudulent activity which can be so well hidden that it is almost impossible to spot.

“And while that is most definitely a growing concern, in the NatWest case, it wasn’t clever, covert AML - it was black bin liners stuffed full of cash being deposited, with sums so large that the bags were breaking, and there wasn’t enough room to store it all. This is such a blatant AML failure, and if Britain’s biggest banks are not taking their obligations seriously, what hope is there for smaller firms?

“I just hope the fact that the FCA has made an example of NatWest will act as a warning for all regulated firms that they will not get away with poor AML practices.”

Dobson says that, during the pandemic, when regulated firms were forced to adapt to new working practices, many struggled to keep on top of everything, with compliance and AML often put to the bottom of the pile. But, he argues, with so much technology out there to help regulated firms run fast, efficient, secure and importantly, affordable AML processes, there is no excuse for any business - big or small - to shirk their responsibilities.

“Our platform offers a simple, secure and reliable way to run a comprehensive AML programme. It is a cloud-based system that can be accessed from any device, making it easy for businesses to run full AML checks - identification, verification and screening - on customers, even if staff are working from home.

“The platform is affordable for all businesses, and offers the same level of compliance for all - automatic hosting and monitoring of all checks - meaning businesses that use it will always be fully compliant and audit ready for when regulators come knocking.”

Dobson concludes: “NatWest’s fine is one of the biggest ever handed out by the FCA, and rightly so, I just hope it is enough to make them rethink their AML processes and start taking it seriously.”

To find out the lessons learnt from the Natwest case and how SmartSearch can aid your firm becoming AML compliant visit: https://www.smartsearch.com/resources/whitepapers/aml-and-identity-checks-lessons-learned-from-the-natwest-case

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