BoB UK settles with British regulators

Investigation finds no
deliberate breach

Bank of Beirut (UK) has reached a settlement with the Financial Conduct Authority (FCA) of Britain, with respect to its having breached Principle 11 of the FCA’s Principles for Businesses, for failure to deal with regulators in an open and co-operative way, in the period between June 1, 2011 and March 20, 2013.

The FCA has fined BoB (UK) £2.1 million ($3.2 million) and has imposed a restriction on its regulated activities for a period of 126 days, in relation to on-boarding new customers that are resident or located in high risk jurisdictions.

“This restriction does not affect the bank’s continued business with its existing customers and correspondent parties,” said Elias Alouf, Chief Risk Officer and Head of the Group Risk Management and Compliance Division at Bank of Beirut.

The FCA also fined two of the bank’s employees, Anthony Wills, former Compliance Officer and Michael Allin, Internal Auditor, £19,600 ($29,500) and £9,900 ($15,000), respectively. “Wills and Allin failed to deal with the regulator in an open and cooperative way when responding to queries about the actions taken to mitigate financial crime risk,” according to a statement by the FCA.

Bank of Beirut (UK) said it accepts the FCA’s findings and is cooperating fully with its investigation.

The FCA’s findings arose from supervisory visits to the bank, which took place in 2010 and 2011, a statement by BoB (UK) said. Following these visits, the Financial Services Authority (FSA), now FCA required the bank to carry out a remediation plan to address concerns relating to the effectiveness of the bank’s compliance and its Anti-Money Laundering (AML) controls.

BoB (UK) said that during the period between June 1, 2011 and March 20, 2013 the bank did not complete all of the action points in the remediation plan and did not complete the remediation of its customer files within the timeframes agreed to with the FSA. The bank did not provide accurate information to the FSA regarding the process of these matters.

After a follow-up visit by the regulators in March 2013, Bank of Beirut hired an external consultant and appointed a dedicated team to undertake and finalize the improvements, the FCA said. The bank completed the remediation plan in October 2013, according to the FCA. “Compliance with its regulatory obligations is a key area of focus for the bank going forward,” said Alouf.

The FCA has found that BoB (UK) did not deliberately breach Principle 11, according to the bank. “Although the FCA expressed concerns about the bank’s AML systems and controls, the FCA did not conclude that the bank had breached Principle 3 in respect of those controls,” said Alouf. “The bank did not profit from its breach of Principle 11 and no loss has been suffered by any of the bank’s customers or correspondent parties as a consequence of the issues identified in this case,” he said.

“The matters investigated by the FCA are historical issues that existed prior to 2013, all of which have now been fully remediated by the bank”, said Alouf. “The bank has since significantly enhanced the resources in its compliance and risk teams and has hired a new chief executive officer and a new head of risk and compliance,” he said.

BoB (UK) settled with the FCA at an early stage of the investigation, the FCA said. Had it not done so, the bank would have faced a fine of £3 million ($4.5 million) and a restriction of 180 days, according to the FCA. Wills and Allin also settled at the first opportunity, had they not they would have faced financial penalties of £28,000 ($42,284) and £14,100 ($21,291) respectively.

“It is essential to consumer protection, market integrity and the prevention of financial crime that we can rely on firms giving us the right information at the right time,” said Georgina Philippou, the FCA’s Acting Director of Enforcement and Market Oversight. “Bank of Beirut’s failings impeded us and left it open to the risk that it might be used for financial crime,” she said.