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FutureStarrMoney Laundering at a NatWest Branch in Walsall, Central England
A case involving money laundering by a NatWest branch in Walsall, central England, has made headlines. A person came to the bank with 700,000 pounds in cash, burst bin liners, and had to repack the funds into hessian bags in order to fit them into the bank's safes. As a result, the customer was falsely labelled as a low risk. The fine, which totalled 400 million pounds, has been reduced by a reduction based on the plea bargain. The customer, Fowler Oldfield, was Britain's largest account holder, and was NatWest's largest customer in the area.
In June 2015, the Bank of England fined NatWest a record-breaking 265 million pounds for failing to prevent money laundering. This is the largest ever case involving a British bank and is the largest criminal money laundering prosecution in U.K. history. A gang of fraudsters deposited hundreds of millions of pounds through NatWest branches across the UK, including one branch that received more than 40 million pounds. They also used couriers to transport cash to the bank's branches, escorting it in bags. The Financial Conduct Authority uncovered the gang's scheme, and a judge ordered the Bank to pay 4 million pounds in costs to the victims.
As a result of the investigation, the FCA ordered NatWest to pay the fine, which amounts to 350.9 million pounds. This is the biggest money laundering case to hit a British bank. The gang deposited hundreds of millions of pounds at NatWest branches. In one branch alone, more than 40 million pounds were deposited. As a result, couriers were walking the streets with bags of cash. The Financial Conduct Authority busted the ring and halted the scheme.
The Bank of England stress test of the NatWest branch was a success. The bank passed the test without any problems, which was unprecedented in a UK bank. The rigged system was designed to simulate a severe scenario, and NatWest's common equity Tier 1 ratio was just 10.3%. However, this low number also highlights the bank's overcapilization and the risks of its future business model. The FCA's report found that the bank's risky behaviour had impacted its ability to avoid financial regulation.
Despite the fine, the FCA also recommended that the bank pay four million pounds in legal fees. The FCA's findings were based on a stress test that aims to simulate a "severe" macroeconomic scenario. In this case, NatWest's CET1 ratio had dropped to just 10.3% at the end of 2020, making it the worst UK bank. A judge in London ordered the company to pay the FCA four million pounds in damages.
During the FCA's investigation, NatWest was able to pass the test with flying colors. The bank's CET1 ratio dropped to 10.3% by 2020, making it the first bank in the world to successfully pass this test. The lenient ruling, as well as the subsequent fines, underscores the bank's overcapilization of its operations. A high common equity Tier 1 ratio shows that NatWest's risks of the regulated banking industry are far greater than those of the U.K.