Jersey Financial Services Commission has fined the local branch of Lloyds investment banking arm £498,000 for regulatory and anti-money laundering breaches.
Lloyds Bank Corporate Markets' Jersey branch specifically breached requirements of the AML/CFT Code and the Banking Code in relation to one correspondent banking relationship between 2008 and 2020, the Jersey FSC said in a statement on 12 August.
It failed to ensure that the correspondent banking relationship was properly identified and risks potentially present in correspondent banking relationships adequately considered and mitigated over a protracted period of time.
The Jersey regulator also said the penalty arose from the failure to properly identify the relationship at an earlier stage, to maintain adequate systems and controls for correspondent banking to mitigate any increased financial crime risk arising from the relationship, and the failure to bring identified deficiencies to the attention of the JFSC more promptly and completely.
It further said LBCM, Jersey Branch agreed to settle at an early stage of the process and therefore qualified for a 50% (Stage One) discount under the JFSC's settlement procedure and that were it not for this discount, it may have been liable to a civil financial penalty of approximately £996,000.00.
Jill Britton, Director General said: "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 said: "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."
