The Financial Conduct Authority (FCA) fined a UK Challenger Bank (Bank) £29 million (after a 30% discount) due to failings with its financial sanctions and anti-money laundering (AML) systems and controls. The FCA commented that the Bank had undergone “exponential growth” but that “its financial crime controls [had] failed to keep pace with its growth”.
This is the largest penalty the FCA has issued in relation to sanctions controls and is indicative of the FCA’s continued focus on the financial crime compliance of regulated firms. The Office of Financial Sanctions (OFSI), responsible for enforcing UK sanctions, has also issued several fines for breaches of the UK’s sanctions regulations, with the biggest fine imposed to date being £20.5 million in 2020.
The UK government is extremely focused on sanctions compliance, having recently significantly increased funding for OFSI and having launched a new Office of Trade Sanctions Implementation (OTSI) within the Department of Business and Trade earlier this month. Accordingly, we recommend that firms regularly review their assessments of sanctions risk and ensure that their sanctions compliance frameworks are fit for purpose to avoid risks of sanctions breaches, financial penalties, and reputational damage.
The FCA’s recent findings provide useful insights into expectations around sanctions compliance for businesses in all sectors, but is particularly instructive for disruptive companies that are leveraging innovative financial technology to grow as fast as possible.
