Bank fined £500K for regulatory breach


A JERSEY bank has been fined almost half-a-million pounds for breaching the Island’s financial services regulatory requirements.

Lloyds Bank Corporate Markets Jersey received the fine in relation to its dealings with one correspondent banking relationship, a regime under which one financial institution provides banking services to another, arrangements seen as carrying additional risk.

The Jersey Financial Service Commission announced on Friday that a £498,000 civil penalty had been issued against LBCM.

The Lloyds branch accepted the regulator’s decision but said their internal investigations concluded that no financial crime had occurred as a result of the relationship.

‘We accept the JFSC’s findings, recognising that not fully adhering to the regulations relating to managing the correspondent banking relationship was not acceptable,’ said chief executive officer Alasdair Gardner. ‘The breaches related to one customer relationship with another Jersey financial institution. While the breaches exposed ourselves to increased risks of financial crime, we conducted our own internal review and did not identify any financial crime as having occurred, or any customer losses from the matters identified. We are pleased that the JFSC has also acknowledged our strong compliance record prior to this matter. The JFSC also recognised our full co-operation with their process.’

The regulator said LBCM failed to adequately identify the correspondent banking relationship and to apply appropriate controls in relation to anti-money laundering and the combatting of financing of terrorism systems.

The relationship was with an overseas incorporated bank and operated between 2006 and October 2021.

‘LBCM, Jersey Branch, treated the relevant relationship as a normal commercial customer,’ the JFSC said in a statement. ‘A correspondent banking relationship may present financial crime risk factors.

‘The JFSC accordingly places great importance on registered persons identifying correspondent banking relationships and ensuring that any higher risk factors are appropriately assessed and mitigated, with effective systems and controls in place.’

The regulator said LBCM agreed to settle early in the process and qualified for a 50% discount in the fine. Without this discount the company could have been liable to pay a fine of nearly £1 million.

‘LBCM, Jersey Branch, failed to identify the correspondent banking relationship over a protracted period,’ said JFSC director general Jill Britton.

‘It consequently failed to put in place appropriate systems and controls for the activity and did not appropriately assess and mitigate any higher-risk factors arising. LBCM, Jersey Branch, was, therefore, left exposed to an increased risk of financial crime occurring.

‘Whilst the nature of this correspondent banking activity did not present the highest risks typically associated with correspondent banking relationships, AML/CFT [Anti-money laundering/countering the financing of terrorism] failures can undermine the integrity and stability of Jersey’s financial services industry.

‘Registered persons must ensure they have effective systems and controls across their business activities to prevent and detect financial crime. The JFSC took account of LBCM, Jersey Branch’s strong compliance record prior to this matter, its remediation of the issues and its full co-operation in this process. LBCM, Jersey Branch, no longer provides any correspondent banking services.’

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