It said the company’s correspondent banking arrangements – in which it provided services to several overseas banks – left it vulnerable to money laundering, though it said the bank’s breaches were not deliberate or reckless.
The action represents the first occasion in which the FSA has taken enforcement action against a firm in relation to money laundering weaknesses in its correspondent banking arrangements.
The FSA said Turkish Bank (UK) acted as a correspondent bank for nine overseas banks in Turkey and six in Northern Cyprus between 15 December 2007 and 3 July 2010.
Under the regulations, providing correspondent banking services to banks based in non-EEA states is recognised as creating a high risk of money laundering that requires enhanced due diligence and ongoing monitoring of the relationship.
During this period, Turkey and Northern Cyprus did not have anti-money laundering (AML) requirements that were equivalent to those in the UK.
The FSA visited Turkish Bank (UK) in July 2010 as part of a thematic review of how banks operating in the UK were managing money laundering risks.
The visit gave serious cause for concern in relation to the bank’s anti-money laundering controls over correspondent banking.
Turkish Bank’s breaches of the MLR included failing to:
- establish and maintain appropriate and risk-sensitive AML policies and procedures for its correspondent banking relationships;
- carry out adequate due diligence on, and ongoing monitoring of, the respondent banks it dealt with and failing to reconsider these relationships when this was not possible; and
- maintain adequate records relating to the above.
Tracey McDermott, acting director of the enforcement and financial crime division, said: “Turkish Bank fell far short of the standards we expect of firms in managing their money laundering risks. This was despite clear warnings from the FSA that it needed to improve.
“Banks must have appropriate policies and procedures in place to manage these risks.
“Turkish Bank’s correspondent banking business made it particularly vulnerable to money laundering risks and its failings exposed UK financial services to the possibility that money could be laundered through the UK. We will continue to demand the highest standards from banks and to take tough action for those banks that fail to meet them.”
