NatWest’s anti-money laundering failures laid bare in gold dealer case

The sight of people lugging £700,000 in black bin bags through a West Midlands shopping centre to a NatWest branch was just one startling red flag among multiple warning signs the UK bank missed in failing to prevent a £365m alleged money laundering scheme.

Over a period of five years Fowler Oldfield, a Yorkshire gold dealer with a predicted annual turnover of £15m, deposited £365m with NatWest — including £264m in cash.

Some individual deposits were unusually large — £42m in cash was paid into a branch in Southall between 2015 and 2016; £750,000 was dropped off in Halifax within three days.

At the NatWest in Walsall shopping centre — where £6.6m cash was deposited, including £700,000 paid in on September 14 2015 — bags were splitting open due to the volume of notes and branch staff had to transfer them into stronger hessian sacks, Southwark Crown Court heard during the bank’s sentencing hearing this week. The money filled two floor to ceiling safes at the branch and even then more had to be stored behind the bank’s grilles.

“Someone was walking through the streets with black bin liners of cash,” said Clare Montgomery QC, prosecutor for the FCA.

Yet no suspicious activity report (SAR) was raised by NatWest with the National Crime Agency before 2016, when West Yorkshire police said it was investigating Fowler Oldfield.

NatWest, which is majority owned by the British government, this week paid the penalty for its deficiencies, with a criminal conviction and a £264.8m fine for breaching anti-money laundering regulations between November 2012 and June 2016. The outcome marked the first criminal prosecution brought by the Financial Conduct Authority (FCA) using anti-money laundering laws.

“NatWest is responsible for a catalogue of failures in the way it monitored and scrutinised transactions that were self-evidently suspicious,” said Mark Steward, director of enforcement and market oversight at the FCA, who added that the bank’s actions had created “an open door for money laundering.” 

Eleven individuals have pleaded guilty of money laundering offences relating to cash being delivered to Fowler Oldfield and a further 13 have been charged.

The case underlines the FCA’s wider determination to crack down on a tide of dirty money that is estimated to cost the UK economy £100bn each year and has raised searching questions about weaknesses in banks’ ability to stop the fraud.

Red flags missed

Fowler Oldfield became a NatWest customer in 2011. From late 2013, at least 50 UK bank branches suddenly started to receive millions of pounds in cash deposits, with £1.8m a day being paid in at one point, Southwark Crown Court heard.

Staff in branches and cash centres, who were responsible for handling these cash deposits, reported their suspicions to colleagues. Some 11 internal alerts were raised and NatWest’s own automated anti-money laundering system was triggered 10 times.

But no appropriate action was ever taken by the bank, the FCA said. Even at the Walsall branch, staff had intended to raise an internal alert but no record was found by the bank.

Many cash deposits highlighted in the case were made via “quick drop” business machines in branches that did not require interaction with bank staff — even though this method had been flagged as a concern in the UK government’s 2015 national risk assessment of money laundering, the regulator noted.

NatWest’s Washington cash centre in north east England raised the alarm as the cash literally failed the smell test. Staff noted that the banknotes would “at times carry a prominent musty smell, indicative of long storage rather than business use.”

Employees were also troubled by the “unusual high volumes” of Scottish notes being deposited by Fowler Oldfield, which was based miles from the Scottish border. The NCA, investigating Scottish banknotes in England and possible links to criminal activity, was alerted but no SAR was raised.

A manager about to retire at NatWest’s cash centre in Basingstoke, Hampshire in 2015 shared his concerns with a financial crime manager about “the most suspicious potential money laundering he had seen in his career”. But the bank said there were sufficient explanations, the court heard.

NatWest’s failures

There were significant gaps in NatWest’s processes. Its automated transaction monitoring system incorrectly identified some cash deposits as cheques — which carried a lower money laundering risk. The bank failed to classify Fowler Oldfield as a high-risk customer for two years.

The only SAR raised to the NCA was in relation to the accounts of a hair extensions supplier that had received about £387,000 from Fowler Oldfield. No SAR was submitted about the gold dealer itself. The internal alerts were investigated at an office in Hertfordshire where some staff were inexperienced and keen to close cases in 30 days, the court heard.

Justice Sara Cockerill, who sentenced NatWest, pointed out the “glaring nature of some of the failures” in the bank’s systems and said without them “the money could not be effectively laundered.”

John Kelsey Fry QC, acting for the bank, told Southwark Crown Court that staff “didn’t miss” the activity. “The quality and adequacy of that scrutiny is another matter”.

Alison Rose, NatWest’s chief executive, has expressed her “deep regret” about the failures. The bank now employs 5,000 dedicated staff and will spend £1bn between 2021 and 2025 improving its anti-financial crime work.

No action is being taken against any current or former employee of NatWest.

Roger McCormick, senior visiting fellow at Bayes Business School, said: “It is disconcerting that even a complex and sophisticated set of procedures for anti-money laundering can let you down if there is a failure of common sense at human level and an apparent inability to act effectively on what seems to have been an obvious set of red flags.”

The case also underlined the lack of sophistication of some financial crime: “The absolute brass neck of people who were willing to bring so much cash for laundering into a bank branch and hand it across the counter in plastic bags reminds us that a great deal of crime happens in plain sight,” said Mark Mullen, chief executive of Atom Bank.