In a recent development, the Financial Conduct Authority (FCA) has fined ADM Investor Services International Limited (ADMISI), a prominent broker, a staggering £6,470,600. This substantial penalty was imposed due to the firm’s inadequate anti-money laundering (AML) systems and controls. The case of ADMISI serves as a stark reminder of the importance of robust AML practices, irrespective of the type of regulated entity.
ADMISI’s business model and its clients posed significantly high money laundering risks. This was attributed to various factors, including the geographical location of its customers and the inclusion of Politically Exposed Persons (PEPs) among its clients. The presence of PEPs alone raised the bar for vigilant AML compliance.
Early concerns and AML failings
The FCA first raised concerns regarding ADMISI’s AML systems back in 2014. One of the major issues highlighted was the absence of a formal process for classifying customers by risk. The regulator expected ADMISI to rectify these shortcomings promptly.
However, despite these early warnings, a follow-up visit to the firm in 2016 revealed significant deficiencies in its AML practices. These included:
- ADMISI’s AML customer risk assessment was found to be basic and inadequate for evaluating a customer’s financial crime risk.
- A comprehensive firm-wide money laundering risk assessment was not conducted.
- There was minimal evidence of ongoing monitoring through periodic customer reviews.
- The firm’s policies were outdated, making reference to obsolete legislation.
After the 2016 visit, ADMISI agreed to certain requirements, including a commitment not to engage in business with high-risk customers. The aim was to reduce the possibility of the firm being exploited for money laundering or illicit financial activities. By the end of October 2016, ADMISI had implemented updated AML policies and procedures to address the identified concerns. Subsequently, after further corrective actions, these requirements were lifted in January 2018.
Therese Chambers, Joint Executive Director of Enforcement and Market Oversight at the FCA, emphasised the critical importance of effective AML checks for all financial firms. She noted that ADMISI’s failures exposed it to the risk of being used to facilitate financial crime. Alarmingly, these deficiencies persisted even after the firm had received clear warnings about the urgency of improving its AML systems.
Lessons and key takeaway for firms
This case highlights essential lessons in Anti-Money Laundering (AML) compliance for financial firms, such as:
- Customer and firm-wide risk assessment: ADMISI’s failure to classify customers by risk had significant consequences. Firms should establish formal processes for customer and firm-wide risk assessment, enabling them to identify and manage higher-risk clients effectively.
- Ongoing monitoring: The lack of evidence of adequate ongoing monitoring was another critical shortcoming in ADMISI’s case. Firms should implement robust mechanisms for periodic customer reviews and transaction monitoring to detect and report suspicious activities promptly.
- Regulatory compliance: Policies and procedures must align with the latest regulatory standards. Outdated references to legislation can lead to non-compliance. Firms should regularly update their policies to reflect evolving regulations and ensure that any changes or updates are effectively communicated within the firm.
- Continuous training: Regular training on AML issues, especially for employees and agents, can enhance their awareness and understanding of the regulatory framework, individual obligations and the firm’s overall compliance responsibilities regarding AML risks and prevention measures.
- Proactive remediation: When deficiencies are identified, firms should take immediate remedial action. In ADMISI’s case, these actions included refraining from high-risk customers. Proactive steps demonstrate commitment to rectifying issues and preventing future lapses.
- Responsiveness to regulatory feedback: When regulators raise concerns and provide recommendations, firms must take them seriously and act promptly. Ignoring regulatory feedback can result in continued deficiencies and increased regulatory scrutiny.
How Neopay can help
The ADMISI case highlights the significance of comprehensive AML controls for all regulated entities, regardless of their specific sector. It’s imperative that firms take proactive measures to ensure compliance with AML regulations and protect themselves from potential penalties.
Neopay, a leader in regulatory compliance solutions, offers a range of services that can significantly enhance AML controls for payment institutions. With our tailored risk assessments, comprehensive training programs, regulatory guidance, compliance audits, and continuous support, Neopay empowers businesses in bolstering their AML capabilities. Additionally, our financial crime audits provide a thorough examination of financial crime prevention and detection measures, identifying vulnerabilities and offering actionable recommendations to mitigate the risk of financial crimes.
To learn more about how we can strengthen your AML controls and support your business in achieving compliance, contact our team today.