The Jersey Financial Services Commission has fined the Jersey branch of Lloyds Bank Corporate Markets (LBCM) £498,000 for breaching its regulatory requirements in relation to one correspondent banking relationship.
Correspondent banking involves the provision of services by one bank (correspondent bank) to another. If not governed appropriately, correspondent banking presents financial crime risks – the correspondent bank typically has no direct relationship with the parties to a transaction so cannot verify their identities or conduct due diligence.
JFSC Director General Jill Britton (pictured) said: “LBCM failed to identify the correspondent banking relationship over a protracted period. It consequently failed to put in place appropriate systems and controls for the activity and did not appropriately assess and mitigate any higher risk factors arising.
"LBCM Jersey Branch was, therefore, left exposed to an increased risk of financial crime occurring.
"While the nature of this correspondent banking activity did not present the highest risks typically associated with correspondent banking relationships, AML/CFT failures can undermine the integrity and stability of Jersey’s financial services industry.
"Registered persons must ensure they have effective systems and controls across their business activities to prevent and detect financial crime.
"The JFSC took account of LBCM, Jersey Branch’s strong compliance record prior to this matter, its remediation of the issues and its full co-operation in this process. It no longer provides any correspondent banking services.”
Alasdair Gardner, CEO of LBCM in Jersey, commented: “We accept the JFSC’s findings, recognising that not fully adhering to the regulations relating to managing the correspondent banking relationship was not acceptable.
"The breaches related to one customer relationship with another Jersey financial institution. While the breaches exposed ourselves to increased risks of financial crime, we conducted our own internal review and did not identify any financial crime as having occurred or any customer losses from the matters identified.”