NatWest fine demonstrates ‘significant problem’ for banks

Bank misconduct expert comments on NatWest’s £264m fine for failing anti-money laundering regulations.

NatWest has been fined more than £264m for its failure to prevent a major money laundering operation across a five-year period, without carrying necessary checks under financial regulations.

A court heard how large amounts of cash were deposited into various branches over time from a suspected gold trading business, with criminal gangs even requiring bin bags to transport it in some instances.

The fine is just the latest episode of reported misconduct in the banking sector, highlighted by the Centre for Banking Research at Bayes Business School (formerly Cass) in its Conduct Costs Project report, released in 2020.

Roger McCormick, Senior Visiting Fellow at Bayes and former director of the project said although the fine relates to historic wrongdoing, it is still important to continue monitoring bank behaviour closely.

“The case of NatWest shows us that conduct risk and conduct costs remain a significant problem for banks,” Mr McCormick said.

“There is always a time lag between an event occurring and its cost materialising – in this case, from the middle of 2016. It would be comforting to think the picture has improved since then, but we can’t be sure, and unless we continue to monitor and analyse bank behaviour and present findings in a way ordinary people can understand there’s a danger that standards will not improve as everyone hopes.

“The Statement of Facts for this case is more than 100 pages long, and there are many lessons that can be learned from it. This episode clearly shows failures at various levels.

“It is disconcerting that even a complex and sophisticated set of procedures for anti-money laundering can let you down if there is a failure of common sense at human level and an apparent inability to act effectively on what seems to have been an obvious set of red flags.

“Wider questions emerge as to how banks have become so remote from their customers, and whether technology truly provides all the answers. This is an interesting case study that all risk managers should consider very carefully.”

All quotes should be attributed to Roger McCormick, Senior Visiting Fellow at Bayes Business School (formerly Cass).

Read more about the Centre for Banking Research at Bayes Business School.

Find out more about the Conduct Costs Project.