Al Rayan Bank in Qatar has been fined £4 million ($4.84 million) by the UK's finance watchdog after failing to carry out adequate checks on potential money laundering and the financing of terrorism.
The Financial Conduct Authority launched an investigation and discovered the bank had accepted £22.74 million in cash deposits on 1,133 occasions from 2015 to 2017.
They included 60 sums of more than £50,000, 16 of which exceeded £100,000 and nine higher than £200,000.
A review of 50 high-risk customer files found in 82 per cent of the cases the bank had failed to verify the source of funds and in 96 per cent of the deposits had failed to verify the customer’s source of wealth.
It cited one customer’s account in which an employee had recommended it be closed due to lack of information about the source of his funds due to his “father’s embezzlement scandal”. The suggestion went unheeded.
In another case, a former Qatari government minister claimed he earned £10 million a year, owned one £10 million property and more homes across Qatar, but the bank did not seek to obtain proof.
Four charities were reviewed as part of the probe. In one example, an aid group that remained unnamed in the report made a cash deposit of £360,000 over which Al Rayan said it had "no concerns" as the charity claimed it was cash accumulated over time.
The FCA said if "diligent" checks had been carried out, the bank would have discovered the same group had shortly beforehand deposited almost £100,000, which the watchdog said should have "raised questions".
"The Authority’s file reviews for two of the four charity customers identified instances of large cash deposits being accepted by Al Rayan with inadequate scrutiny of the explanations provided and insufficient consideration of previous transactions and anticipated account activity," the FCA said.
Al Rayan is owned by Qatar’s second-largest bank, Masraf Al Rayan, whose biggest stakeholders are institutions run by the Qatari state.
"Between April 1, 2015 and November 30, 2017, Al Rayan allowed money to pass through the bank and be used within the UK without carrying out appropriate checks," the FCA said.
"The firm failed to adequately check its customers’ source of wealth and ... funds when it was required to make sure the money was not connected to financial crime.
"The failings were made worse by the lack of proper training provided to staff about how to handle large deposits, which further heightened the risk of money laundering and financial crime.
"Al Rayan was aware of these weaknesses and failed to implement effective changes to fix them, despite the FCA raising concerns about the inadequacies of their systems."
The investigation also revealed the bank had a "significant" backlog of more than 300 existing high-risk and politically exposed customers who had not been risk-assessed.
Mark Steward, executive director of enforcement and market oversight at the FCA, said: "Al Rayan failed to manage the risk that it might be used to facilitate money laundering.
"These failings create the conditions in which financial crime is facilitated and can take root within a firm," he said. "While the risk was caught in time, the failings here were egregious."
Al Rayan, which started operating in the UK in 2004, has headquarters in Birmingham and runs several branches in the country, dealing with about 90,000 customers. It said it had since overhauled its operations and management and was focused on combatting financial crime.
“The FCA identified historic weaknesses in the Bank’s financial crime systems and controls that date back to a period between 2015 and 2017," said Giles Cunningham, chief executive officer at Al Rayan Bank. “The FCA found no evidence of any money laundering or other criminal activity by the Bank nor its customers and none of the Bank’s existing management were in a senior management function at the time.
“The Bank cooperated fully throughout, and all identified weaknesses have been fully resolved with the support and assistance of external, independent subject matter experts. The financial penalty will have no material impact. The Bank remains well capitalised and will report very strong financial results for 2022.
“Maintaining strong defences against the evolving threats of financial crime is an essential part of our business plan and is being led by the new Board and Executive team.”
Clients have included the Finsbury Park Mosque in London, which was once run by convicted hate cleric Abu Hamza who is serving a life sentence for terrorist offences in the US.
The Nectar Trust, the British arm of the Qatar Charity in Doha, which is banned by a number of countries including the UAE, is also a client of Al Rayan.
Under the Money Laundering, Terrorist Financing and Transfer of Funds Regulations 2017, there is an onus on banks to exercise appropriate due diligence on clients and their source of wealth. Failure to do so can lead to multimillion-pound fines.