FCA Fines Investment Firm $7.8 Million for Anti-Money Laundering Failures

The UK Financial Conduct Authority (FCA), which has been taking aggressive steps to clarify and enforce the rules of the road for asset managers and crypto exchanges, has slapped a commodities broker with a massive fine for anti-money laundering (AML) failures.

Though based in New York City, ADM Investor Services International has received a $7.8 million fine from the UK financial regulator.

The FCA Targets Chronic AML Compliance Failures

The regulator has serious concerns about the potential for the misuse of ADM’s services for money laundering. This is partly a function of the firm’s geographical breadth, the FCA said. But it also has to do with the preponderance of high-risk clients and “Politically Exposed Persons” in the company’s client base, according to an FCA statement. The FCA alleges practices that breach Principle 3 of its “Principles for Business.”

Nor is this the first time that the FCA has raised concerns with ADM. Back in 2014, the FCA raised concerns. In particular, the FCA took issue with the lack of an internal system at ADM for classifying customers by risk level.

The regulator expected that, having received warning, the firm would swiftly put new controls in place. But an on-site examination in 2016 found continuing gaps. AML controls were still crude and the firm’s internal policies made reference to old legislation, said the FCA.

Moreover, the company was doing little in the way of regular customer reviews. Nor did it carry out firmwide AML risk assessments. Taken together, such failings open the door wide for money laundering, the FCA believes.

Once again, ADM agreed to upgrade its internal controls. And to turn down high-risk customers. But after a period of tougher enforcement following the 2016 review, the new AML requirements were dropped in 2018.

Learn more about the FCA’s relations with firms in the investment, fintech, and cryptocurrency sectors.

The Regulator and Respondent Agree on a Penalty

In contrast to many regulatory settlements and judgments, the FCA took the respondent’s input into consideration when deciding on an appropriate penalty.

The firm did not contest the charges. By asking the FCA’s Regulatory Decisions Committee to help decide what the fine should be, ADM received a 30% discount. Without this compromise, the fine would have exceeded $11.2 million. Rather than $7.8 million.

It is the latest in a series of high-profile enforcement actions and policy changes on the part of the FCA. Last month, the regulator rolled out a new set of rules for crypto marketing.

Effective October 8, rules for crypto and NFT marketing in the United Kingdom will be much stricter. Firms will have to publish risk warnings letting customers know of the possibility of market shifts wiping out their holdings.

Violators will face steep fines or jail time, and the rules apply even to foreign firms marketing their products within UK borders.

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