Thursday 21 September 2017

Embarrassment for AIB as bank fined €2.3m for breach of money laundering rules

AIB is the biggest bank in the State. It has 2.6 million customers, and almost 300 branches, business centres and offices between it and EBS. (Stock photo)
AIB is the biggest bank in the State. It has 2.6 million customers, and almost 300 branches, business centres and offices between it and EBS. (Stock photo)
Charlie Weston

Charlie Weston

State-owned AIB has been hit with a massive Central Bank fine for failing to check if it was being used for money laundering and tax evasion.

The bank has to cough up €2.275m to the Central Bank for breaches of anti-money laundering legislation.

The fine is a huge embarrassment for the bank, just months away from a flotation that is likely to see 25pc of the bank sold off for about €3bn.

AIB is the biggest bank in the State. It has 2.6 million customers, and almost 300 branches, business centres and offices between it and EBS.

Up until now, a number of credit unions, especially small ones, have had fines imposed and have been reprimanded for failures under anti-money laundering legislation.

But the fine for the State's biggest bank prompted surprise among financial experts, as a supposedly professional organisation has failed to observe strict rules to tackle money laundering and tax evasion.

The breaches are understood to have occurred mainly at EBS, which was taken over by AIB in July 2011, soon after the banks were bailed out.

The Central Bank identified six breaches of anti-money laundering and counter-terrorist financing controls, policies and procedures.

The Central Bank said the breaches occurred in July 2010 and persisted on average for more than three years.

The bank failed to:

• report suspicious transactions without delay to gardaí and Revenue Commissioners.

• conduct customer due diligence on existing customers who had accounts prior to May 1995, when anti-money laundering laws became effective.

At one stage, AIB's anti-money laundering unit had a backlog of 4,200 alerts it should have reported to gardaí and Revenue. It took the bank 18 months to clear the backlog.

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Sources in banking stressed there was no evidence the bank was being used for money laundering, but the fine is a blow to AIB's credibility ahead of its flotation.

Before Christmas, Ulster Bank was fined €3.3m for breaches of anti-money laundering and terrorist-financing regulations.

Derville Rowland, director of enforcement at the Central Bank, said: "This is the second enforcement action taken, in the last six months, by the Central Bank against a bank for unacceptable weaknesses in its anti-money laundering framework."

She said the Central Bank expected that anti-money laundering frameworks were fit for purpose in firms it regulated.

"In particular, we expect that our retail banks, as gateways to the financial system, have in place exemplary anti-money laundering systems and controls," Ms Rowland said.

Asked why it had been so slipshod, the bank noted the settlement agreement. It added that the breaches happened between July 2010 and July 2014.

"A comprehensive risk-mitigation programme was put in place to resolve all of the issues," the spokesman said.

The bank has fully co-operated with the Central Bank at all stages of this investigation, AIB said.

Irish Independent

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