The UK's Financial Conduct Authority (FCA) and Prudential Regulation Authority (PRA) have imposed a combined fine of £87.5 million (approximately $125 million) on UBS for serious failures in its anti-money laundering (AML) controls. This penalty is the largest ever levied by the FCA in connection with money laundering breaches, underscoring the severity of the bank's compliance shortcomings.
Details of the Failures
The regulators found that between 2012 and 2016, UBS failed to properly assess the risks associated with certain high-risk customers, particularly those in jurisdictions with a high risk of corruption. The bank also failed to adequately monitor transactions and report suspicious activity, allowing potential money laundering to go undetected.
Specifically, the FCA noted that UBS's systems were not robust enough to handle the volume of alerts generated, leading to a backlog of un-reviewed transactions. The bank also failed to conduct adequate due diligence on customers from high-risk countries, including those with links to politically exposed persons (PEPs).
Regulatory Response
Mark Steward, the FCA's executive director of enforcement and market oversight, stated: "UBS's failings were serious, widespread, and resulted in millions of dollars being laundered through the UK financial system. This fine reflects the importance the FCA places on firms having effective controls in place to combat financial crime."
The PRA, which focused on the prudential aspects of the case, also issued a statement emphasizing that the bank's deficiencies could have posed risks to the stability of the financial system.
Impact on the Bank
UBS has cooperated with the investigation and has since invested heavily in upgrading its compliance infrastructure. The bank has also set aside funds to cover the fine, which is expected to impact its quarterly earnings. This penalty serves as a stark warning to the entire banking sector about the consequences of AML failures.
According to the FCA, the fine would have been even higher if UBS had not agreed to settle at an early stage, receiving a 30% discount for cooperation.
