Lloyds Bank Charged with £500K Fine for Breach of Financial Regulatory Standards

Lloyds Bank corporate markets jersey received a fine of £498,000 in relation to the dealings with the correspondent baking relationship

An arrangement whereby one financial institution offers banking services to another is known as a correspondent banking relationship, and Lloyds Bank Corporate Markets Jersey has been fined in connection with its dealings with this particular relationship.

On Friday, the Jersey Financial Service Commission disclosed that LBCM had been assessed a civil fine of £498,000.

The Lloyds branch accepted the regulator’s ruling but asserted that their internal inquiries had found no evidence of financial criminality connected to the relationship. The Chief Executive Officer Alasdair Gardner stated that we accept that not fully adhering to the regulations relating to the managing of the correspondent banking arrangement was unacceptable. 

He further added: “The breaches related to one customer relationship with another Jersey financial institution. While the breaches exposed us 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.”

According to the regulator, LBCM failed to apply suitable controls with respect to anti-money laundering and the fight against the financing of terrorist systems, as well as to effectively identify the correspondent banking relationship.

It lasted from 2006 until October 2021 and involved a bank with overseas incorporation.

According to a statement from the JFSC, “LBCM, Jersey Branch, viewed the relevant connection as a routine commercial customer.” A correspondent banking arrangement may have risk elements for financial crime.

The JFSC thus places great importance on registered people recognising correspondent banking arrangements and making sure that any higher risk concerns are properly analysed and managed, with strong procedures and controls in place.

According to the regulator, LBCM decided to settle early on and was eligible for a 50% reduction in the fine. Without this reduction, the business may have been required to pay a fine of around £1 million.

Jill Britton, director general of the JFSC, stated that “LBCM, Jersey Branch, failed to identify the correspondent banking arrangement over a protracted time.”

“Whilst the nature of this correspondent banking activity did not present the highest risks typically associated with correspondent banking relationships, AML/CFT [Anti-money laundering/countering the financing of terrorism] 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 cooperation in this process. LBCM, Jersey Branch, no longer provides any correspondent banking services.”

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