Last Updated on Saturday, 31 October, 2020 at 12:32 pm by Andre Camilleri
Lombard Bank has been slapped with a €340,058 fine by the Financial Intelligence and Analysis Unit (FIAU) over breaches of money laundering regulations.
The fine came after the FIAU carried out an on-site compliance review in 2019.
The FIAU said that they were provided with a copy of the Bank’s Business Risk Assessment (BRA) from 2018, and said that “due to the BRA not providing a holistic understanding of the various risk factors that may arise out of the Bank’s activities, the Bank was not in a position to comprehend which areas of risk required the strongest controls.”
The FIAU said that the bank updated the BRA and tried to implement “a scoring mechanism by the introduction of a Risk Scoring Matrix”, but they determined that this was “far from being adequate to cover an understanding of the Bank’s business risks.”
They observed that the controls introduced are focused on addressing the possible risk of non-compliance with AML/CFT obligations rather than on the mitigating effect of the controls put in place.
The FIAU also reported shortcomings in the bank’s risk assessment procedures, saying that “the measures and methodology reflected within these procedures were not rigorous and comprehensive enough.”
There were further breaches in the bank’s due diligence, the FIAU said before noting that a number of files which required enhanced due diligence “were either not carried out or deemed to be inadequate.”
One example cited by the FIAU is of a client file of a politically exposed person, wherein the bank failed to apply enhanced due diligence procedures that would address the risks emanating from a PEP.
“This in view that despite being aware of the customer’s political involvements, the Bank failed to establish the Source of Wealth (SoW) and Source of Funds (SoF)”, the FIAU said.
The compliance review performed revealed that the Bank had failed on a number occasions to adhere to its obligation to obtain sufficient information to establish the purpose and intended nature of the business relationships it maintained with its customers, the FIAU said.
Throughout the compliance examination, the officials carrying out the review noted that three files contained inadequate information recorded to satisfy the source(s) of wealth requirements. These files either had no information at all, or the information held on file did not provide enough detail to support the activities that generated the customer’s overall accumulation of wealth, the FIAU said.
Doubts were also raised as to how a bank, having such a size and customer base could update its records manually, something which as evidenced from the findings of the compliance review, was not being achieved by the bank.
Serious shortcomings were identified in relation to the bank’s obligation to scrutinise transactions taking place through the customers’ accounts.
Citing an example, the FIAU noted that in one of the files reviewed, although a deposit of €2,000,000 had been made, the provenance of these funds was not substantiated in any manner.
In addition, although there was a substantial increase in the funds deposited with the bank from this same customer which resulted in a deposit of €4,000,000 within a span of only 10 months, such a substantial increase was not questioned by the Bank, the FIAU said.
In a statement following the news, Lombard Bank said that they would be appealing against the decision.
The bank said that the breaches did not relate to any suspicions or evidence of money laundering, and that it was committed to prevent the use of its services for any form of illicit activity.
“Indeed, as a matter of policy it does not enter into business relations with those involved in sectors considered to carry inherent AML/CFT risks while it continues to strengthen its defences to this end.”