Broker heavily fined for “serious” financial crime control failings

The nature of ADM Investor Services International Limited’s business and client base presented potentially high levels of money laundering risk because of its business model, the geographical location of its customers, the proportion of its business involving high-risk clients and due to the fact that the company had ‘Politically Exposed Persons’ as clients.

The FCA raised concerns with ADM Investor Services International Limited in 2014 about its anti-money laundering systems, including the absence of a formal process to classify customers by risk.

The FCA then fully expected ADM Investor Services International Limited to make improvements. However, during a 2016 visit, the FCA found that significant failings remained.

In particular, the firm’s anti-money laundering customer risk assessment was basic and did not enable an assessment of a customer’s financial crime risk. 

Further, it did not conduct a firm-wide money laundering risk assessment. In addition, there was little in the way of evidence of adequate ongoing monitoring in the form of periodic customer reviews.  

It was also discovered that policies were outdated and referred to old legislation.

Agreement on requirements   

Subsequent to the 2016 visit, ADM Investor Services International Limited agreed to requirements, including one not to take on business from high-risk customers in order to lessen the threat of the firm being used to launder money or finance crime.

By the end of October 2016, ADM Investor Services International Limited had introduced anti-money laundering policies and procedures to address the concerns identified. After further remedial action, the requirements were lifted in January 2018.

Effective checks

Therese Chambers, joint executive director of enforcement and market oversight at the FAC, explained: “All financial firms need to have effective anti-money laundering checks in place. ADM Investor Services International Limited’s failures put the organisation at risk of being used to facilitate financial crime. These failings continued even after the firm had received clear warnings on the need to improve its systems.”

The firm did not dispute the FCA’s findings and exercised its right, under the FCA’s partly contested case process, to ask the FCA’s Regulatory Decisions Committee to assess the appropriate level of penalty.

The firm’s agreement to accept the FCA’s findings meant that it qualified for a 30% settlement discount. Otherwise, the FCA would have imposed a financial penalty of £9,243,738.

These failings were a breach of Principle 3 of the FCA’s Principles for Businesses, which requires a firm to take reasonable steps to ensure that it has organised its affairs responsibly and effectively, with adequate risk management systems being put in place.

Firms that fail to implement adequate anti-money laundering systems and controls are exposed to the risk of financial crime and benefit from an unfair competitive advantage over compliant firms as they save on the costs involved in implementing such systems and also because they are attractive to customers who wish to avoid customer due diligence and more rigorous enhanced due diligence checks.