A Subsidiary of Russian bank Gazprombank has been banned by the Swiss Regulator, The Financial Market Supervisory Authority (FINMA), for failing “to carry out adequate economic background clarifications into business relationships and transactions with increased money laundering risks”.
Following information leaked from the Panama Papers, FINMA carried out investigations into over 30 Swiss banks. As a result, a probe into Gazprombank Switzerland was carried out in 2016 to look at their due diligence practices during the past 10 years (2006- 2016). Banks are required to adequately fulfil anti-money laundering requirements and apply due diligence to their client accounts and business relationships. Gazprombank Switzerland was found to be in breach of these rules and requirements and failed to implement effective measures to prevent the risk of money laundering.
Results from the investigation found that Gazprombank Switzerland breaches were in these areas:
- Risk categorisation – incorrectly categorising risks of business relationships;
- Clarification of relationships – inability to clarify relationship details of clients and the activities that were being conducted;
- Record keeping – poor record keeping of transactions, and often no validation of documents;
- Reporting – Gazprom Switzerland often failed to report suspicious activity or relationships;
- Timing – necessary actions were not taken in appropriate and effective time for reporting and in the overall process.
As a result of these findings, FINMA took the decision to apply limitations on Gazprombank Switzerland’s private client business activities and demanded that the bank had new structures put in place. This resulted in the strict monitoring of current and existing business, as well as the banning of Gazprombank Switzerland from acquiring any new business, until further notice. In addition to this, Gazprombank Switzerland was ordered to have a Risk Committee consisting of members being both independent and on the Board of Directors.
It is imperative that financial institutions adhere to anti-money laundering regulations and achieve the requirements that promote successful anti-money laundering processes. Institutions must understand that preventing or tackling issues of money laundering requires continuous systematic development, constant and accurate record keeping and effective reporting systems.
Applying a risk-based approach to customer due diligence is fundamental to preventing money laundering and is achieved by gaining clarity and a greater understanding of clients, their wealth, income and behaviours. This will allow institutions to put in place the necessary systems and procedures to mitigate risks and, as a result, reduce the likelihood of fines or having other enforcements imposed on them.
Lysis works with financial institutions to ensure their policies and controls comply with domestic and international AML requirements. By commissioning an independent review of AML controls, firms will be able to ensure compliance with these regulations. For more information please contact firstname.lastname@example.org.