JFSC fines Lloyds Bank Corporate Markets Plc, Jersey Branch (LBCM, Jersey Branch) for regulatory and AML/CFT breaches

LBCM, Jersey Branch has been issued with a £498,000.00 civil financial penalty for breaching its regulatory requirements in relation to one correspondent banking[i] relationship.

For a protracted period LBCM, Jersey Branch failed to adequately identify the correspondent banking relationship and apply appropriate AML/CFT systems and controls. LBCM, Jersey Branch treated the relevant relationship as a normal commercial customer. A correspondent banking relationship may present financial crime risk factors. The JFSC accordingly places great importance on registered persons identifying correspondent banking relationships and ensuring that any higher risk factors are appropriately assessed and mitigated, with effective systems and controls in place.

Jill Britton, Director General commented:

“This penalty is levied following LBCM, Jersey Branch’s breaches of the regulatory and AML/CFT regime in regard to its one correspondent banking relationship.

LBCM, Jersey Branch 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.

Whilst 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. LBCM, Jersey Branch no longer provides any correspondent banking services.”

Alasdair Gardner, LBCM, Jersey Branch CEO 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.

We are pleased that the JFSC has also acknowledged our strong compliance record prior to this matter. The JFSC also recognised our full co-operation with their process.”

The JFSC has issued a public statement outlining the findings of its case.

[i] Correspondent banking is the provision of banking services by one bank (the correspondent bank) to another bank (the respondent bank). If not governed appropriately, correspondent banking presents a number of financial crime risks which may be exploited. The correspondent bank typically has no direct relationship with the underlying parties to a transaction and is therefore not in a position to verify their identities or conduct due diligence.

Lloyds Bank Corporate Markets Plc, Jersey Branch (LBCM, Jersey Branch) Public Statement