Updated November 2
A €2 million deposit was made into a Lombard Bank account without the origin of the funds being substantiated in any way, the FIAU has found.
In a report published on its website, the Financial Intelligence Analysis Unit said the only documents maintained on file for this large deposit were copies of cheques issued from bank accounts that the customer held with another bank.
A substantial increase in the funds deposited with the bank by the same customer resulted in deposits running to €4 million within a span of only 10 months. This was not questioned by the bank, the report says.
The FIAU fined the bank €340,058 for a series of breaches of anti-money laundering rules, which included failure to apply enhanced due diligence procedures to a politically exposed person.
In a statement on Friday, Lombard said the FIAU had noted the shortcomings during an inspection carried out in September and October of 2019.
According to the FIAU report, one of the customer files reviewed during the inspection showed that although the customer received a deposit of over €400,000, the only explanation given was that the funds were the customer’s savings inherited from her parents.
However, this statement was not corroborated with sufficient evidence. The bank was expected to obtain a copy of the will and not simply rely on an explanation given by the customer, the FIAU said.
In another client file, the bank failed to obtain supporting documentation in relation to two inward payments totalling €1.5 million.
Lombard tried to explain the origin of these funds by presenting an increase in share capital and an explanation that the funds originated from the ultimate beneficial owner’s account. But these funds had actually originated from the UBO’s two other companies.
Again, the bank failed to question why the account holder had received these funds.
Serious shortcomings were also identified in relation to the bank’s obligation to scrutinise transactions taking place through customers’ accounts. It either did not scrutinise the transactions or carried out inadequate monitoring of the activity.
There was minimal or no supporting documentation held on file for a number of transactions that were unusual or not in line with the information provided by the clients.
On certain files, the bank’s own risk assessment did not include a proper analysis of risk scenarios, the likelihood of any risk materialising and the possible impact these could have.
As a result, the bank was not in a position to comprehend which areas of risk required the strongest controls.
It was not able to understand the risks posed by certain customers. The bank also failed to obtain relevant evidence to justify transactions carried out by this client.
The FIAU said that a file review done during an inspection of the bank established that in one case involving a Politically Exposed Person, the bank had failed to apply enhanced due diligence procedures.
In a further three files, despite being aware of the customers’ political involvements, the bank failed to establish the source of wealth and source of funds.
This is required to confirm that the customer does not handle proceeds derived from corruption or other criminal activities.
Lombard tells shareholders it intends to appeal
In a statement to the market issued on Monday, Lombard Bank said the FIAU report conclusions "in no way suggest the existence of a suspicion nor the
presence of money laundering".
The bank said that the conclusions featured excerpts of findings concerning individual cases and did not include the context surrounding them, which made the findings open to misinterpretation.
It also reiterated its intention to appeal the findings.