A Dubai regulatory review two years ago, which has not previously been reported, found that the private bank did not have documentation to show the sources of some clients’ wealth and in some cases lacked even basic data such as current addresses and phone numbers.
Monday 16, September 2019
Standard Chartered, fined billions of dollars since 2012 for regulatory violations, has discovered that it cannot explain how some of its wealthiest clients acquired their fortunes and is reviewing thousands of customer accounts at its private bank, reported Bloomberg.
Similar failings have been identified at major hubs including Singapore, Hong Kong and London.
This is not the first failure of the bank’s anti-money-laundering efforts. In April, Britain’s financial watchdog fined the lender GBP 102 million ($127 million) for serious and sustained shortcomings in its client due diligence and monitoring, including in the UAE between 2009 and 2014. That was part of a $1.1 billion settlement with US and UK regulators that also took Standard Chartered to task over its handling of transactions that violated sanctions against Iran and other countries.
In a statement, the lender said that Standard Chartered’s private bank has made tremendous strides over the past few years, in terms of its business performance and equally in setting industry-leading standards for client due diligence.
Chief Executive Officer Bill Winters has had to address repeated regulatory missteps at the London-based bank, which gets more than 80 per cent of its profit from Asia. When he took over in 2015, he pledged a root-and-branch review of the firm’s compliance protocols to bring to an end the run of fines the bank had incurred.
In 2017, Chief Information Officer Michael Gorriz said the bank was nearly over the hump on costly compliance upgrades required to cope with stricter regulations.
But the fines keep coming, in 2018 two units of the bank were fined about $4.7 million by authorities in Singapore for anti-money-laundering failings over the transfer of client assets from Guernsey to a branch in the Asian city-state.
The private bank has some $65 billion of assets and accounted for about four per cent of the operating income of the firm in the first half.
Following the 2017 review, the Dubai Financial Services Authority ordered the bank to bring in external consultants to act as an independent check on the clean-up. The bank hired Deloitte and two years later is hoping to wrap up the process, which involved the remediation of an unidentified number of client accounts.
Senior managers, including Didier von Daeniken, Global Head of the Private Bank, were scheduled to meet with Dubai regulators this month.
The private bank is currently conducting an internal review of all of its roughly 8,000 customer accounts to ensure that it is fully compliant with anti-money-laundering rules. A team of Deloitte consultants is helping with this work in Singapore and Hong Kong, which account for the largest share of the private bank’s business, the people said.
Regulators in many countries require private banks to verify how their wealthy clients acquired their fortunes to help guard against criminals and corrupt businessmen and politicians using the international financial system to launder ill-gotten gains.
Standard Chartered is not the only lender in regulators’ crosshairs. Money-laundering scandals have engulfed some of Europe’s biggest banks and exposed the vulnerability of the financial system.
While many of the failings at Standard Chartered date back as far as the 1980s, ongoing reviews of new clients, known as control sample tests, continue to turn up some breaches.
Standard Chartered says it plans to increase the size of its private bank, which offers investment, credit and wealth planning services to high-net-worth individuals around the world.