British regulators have fined a Swiss private bank £4.2 million ($6.6 million) for failures in its anti-money laundering controls.

The UK’s Financial Conduct Authority (FCA) announced that it has fined EFG Private Bank Ltd (EFG), the UK subsidiary of the EFGI Group, a Switzerland-based global private banking group, “for failing to take reasonable care to establish and maintain effective anti-money laundering (AML) controls for high risk customers.”

The FCA says that the failings, which were serious and lasted for more than three years, were uncovered when its predecessor, the Financial Services Authority (FSA), undertook a thematic review of anti-money laundering controls. The FSA visited EFG in January 2011. “That visit and further investigation caused serious concern to the FSA,” it says, adding that the investigation found that EFG had not fully put its AML policies into practice.

It also found that 17 of 36 reviewed customer files, opened between December 2007 and January 2011, “contained customer due diligence that highlighted significant money laundering risks, but insufficient records of how the bank¹s senior management had mitigated those risks.” Of those 17 files, the FSA found that the risks highlighted in 13 files related to allegations of criminal activity or that the customer had been charged with criminal offences including corruption and money laundering. EFG also failed to appropriately monitor its higher risk accounts, the FCA says.

“One of the FCA’s objectives is to protect and enhance the integrity of the UK financial system. This includes ensuring money in the UK system is clean,” said Tracey McDermott, head of enforcement and financial crime. “Banks are the first line of defence to make sure that proceeds of crime do not find their way into the UK. In this case while EFG’s policies looked good on paper, in practice it manifestly failed to ensure that it was addressing its AML risks. Its poor implementation of its agreed policies risked the bank handling the proceeds of crime.
These failures merited a strong penalty from the FCA.”

“Firms that accept business from high risk customers must have systems, controls and practices to manage that risk. The FCA will continue to focus on high risk customers and business,” McDermott added.

The regulator says that EFG settled at an early stage of the investigation and qualified for a 30% discount on its fine. Without the discount the fine would have been £6 million.