The FSA said the failings at Coutts were serious, systemic and were allowed to persist for almost three years.
It resulted in an unacceptable risk of Coutts handling the proceeds of crime.
In October 2010, the FSA visited Coutts as part of its thematic review into banks’ management of high money-laundering risk situations. Following that visit, the FSA’s investigation identified that Coutts did not apply robust controls when starting relationships with high risk customers and did not consistently apply appropriate monitoring of those high risk relationships.
In addition the FSA determined that the anti-money laundering team at Coutts failed to provide an appropriate level of scrutiny and challenge.
The FSA identified deficiencies in nearly three quarters of the PEP and high risk customer files reviewed.
Coutts said that the fine related to historic activity undertaken between December 2007 and November 2010.
The bank added that it cooperated fully and openly with the FSA throughout the investigation and that it had found no evidence that money laundering took place during that time.
Tracey McDermott, acting director of enforcement and financial crime, said: “Coutts’ failings were significant, widespread and unacceptable. Its conduct fell well below the standards we expect and the size of the financial penalty demonstrates how seriously we view its failures.
“Coutts was expanding its customer base which increased the number of high risk customer relationships. The regulatory environment in relation to financial crime had also changed. It is therefore particularly disappointing that Coutts failed to take appropriate steps to manage its AML risks.
“This penalty should serve as a warning to other firms that, not only should they ensure they constantly review and adapt their controls to changing financial crime risks within their businesses, but that they must also make changes to reflect changing regulatory or other legal standards.”
Rory Tapner, chief executive of the wealth division of RBS, said: “We are disappointed that Coutts & Co did not meet the FSA’s standards with regard to establishing and maintaining effective AML controls in relation to high risk clients.
“Since the FSA first raised its concerns, we have implemented a number of improvements to prevent any recurrence of these failings. Regulatory reforms continue apace.
“We remain committed to ensuring that our systems and controls are robust and counter the risk of financial crime in all the markets in which we operate.”
