Ghana Bank decision notice: FCA issue fine for correspondent banking failures
Today the FCA fined GHIB £5.8m for financial crime systems and control failings relating to correspondent banking.
Given our team’s direct and extensive involvement in the earlier stages of the regulatory work – we are uniquely placed to help you understand the key issues, challenges and failings coming out of this enforcement.
Some key messages taken from the decision notice include:
Fragmented policy and procedure framework
The bank had multiple policies and procedures overlapping and delivering different messages. It became difficult for those on the ground to have clarity around the correct one to use at a point in time.
We are helping a number of firms looking to clearly and succinctly articulate their financial crime framework, partly in an effort to avoid some of the issues raised in this decision notice.
Inadequate EDD, including ongoing monitoring
The bank failed to adequately demonstrate effective EDD on their correspondent banking portfolio. Shortcomings include:
poorly articulated nature and purpose
negative media screening
a lack of understanding around the quality of the respondent’s supervision
a lack of understanding around the quality of the respondent’s controls
not documenting the responsibilities of the respondent
inconsistently obtaining senior sign off
failure to perform sanctions checks on a number of respondents
poorly executed periodic reviews and not terminating relationships when insufficient information was provided by the respondent
This point is particularly timely as we see sanctioned Russians looking to utilise alternative banking facilities. Ongoing due diligence and monitoring of your correspondent relationships will help you identify respondents who may be being used to evade sanctions.
Remediation too slow and not effective
In a similar message to that in the HSBC fine of December 2021 it is not enough to simply say that a remediation programme is in place. Senior management need to ensure timeliness of delivery AND get comfort, in the form of assurance, that the remedial efforts are delivering effective outcomes.
We have been engaged by firms to provide quality assurance over the closure of their remediation workstreams that has provided senior management with the confidence to close remedial activity.
Not taking on board previous regulatory soundings
As with the majority of FCA notices, the FCA specifically calls out the firm for not taking heed of previous fines and regulatory censure. Firms should be benchmarking themselves against the key points of these fines (including this one) and take appropriate action.
We’ll be producing a 2 page cilent note summary – including practical steps your firm can take off the back of the fine. Let us know if you’d like a copy.
Lack of risk sensitive training
Online courses were often off the shelf and were not tailored to the institution.
We are seeing a number of requests from institutions asking us to design bespoke training for their institutions based on their control framework and the unique risks faced by their firm.
Wider read across
The issues raised in this notice focus on correspondent banking, but they easily extrapolate across all Banking products and services. Many of the issues will be even more pertinent to non-banks including newer payments / crypto firms (for example those that utilise the agent / distributor model – the risks are the same)
To better understand the specific issues and ensure you are not making the same mistakes, we recommend having a conversation with us: contact@avyse.co.uk
