According to the FCA’s Oct. 12 decision notice, between June 2014 and July 2017, Gatehouse “failed to conduct sufficient checks on its customers in countries with a higher risk of money laundering and terrorist financing” and “failed to undertake the correct checks when some of the customers were classed as Politically Exposed Persons (PEPs).”
The FCA also said in its decision notice that Gatehouse’s compliance function was under-resourced and, “although Gatehouse had adopted a three-lines-of-defense model, this did not operate effectively, meaning that frontline relationship managers did not appropriately screen customers, and an overburdened compliance function was left to remedy deficiencies in the quality of due diligence information collected.”
In one instance, Gatehouse opened an account for a company based in Kuwait to pool the customers of this company’s funds for a prospective real estate investment. However, Gatehouse relied on the Kuwait company to carry out customer due diligence of the investors, “a large number of whom were high risk, high-net worth customers,” according to the FCA notice.
“Gatehouse took inadequate measures to confirm the quality of this company’s AML checks and did not require it to collect information about customers’ source of wealth and source of funds,” the FCA said. Consequently, for two years, Gatehouse accepted $62 million into the account without properly vetting the funds for financial crime risks, according to the FCA notice.
“Gatehouse Bank’s failures exposed itself to the risk that it might be used as part of a laundering process for illegal funds,” said Mark Steward, Executive Director of Enforcement and Market Oversight. “While not deliberate, there can be no excuse for failures as serious as this. The FCA will continue to hold firms to account for poor anti-money laundering systems and controls.”
In deciding the civil penalty, the FCA said it considered Gatehouse’s remedial measures in fixing the deficiencies in its AML controls. “In particular, between June 2014 and August 2016, Gatehouse undertook a compliance review to remediate customer files” and “invested in improving its AML systems and controls, including engaging external consultants to assist it and to advise on the overhaul of its AML systems and controls,” the FCA said in the notice.
Additionally, the FCA noted, “from mid-2016 to mid-2017, Gatehouse established and implemented a new suite of AML and financial crime related policies and procedures which addressed the deficiencies.”
Because Gatehouse cooperated and settled at an early stage of the investigation, it qualified for a 10 percent reduction off the original penalty of £2.26 million ($2.6 million). 
Jaclyn Jaeger is a contributing editor at Compliance Chief 360° and a freelance business writer based in Manchester, New Hampshire.