ALEX BRUMMER: FCA finally shows its mettle by bringing money laundering charges against NatWest
Who would have thought it? The dusty, slow to act, legalistic and over-cautious City regulator, the Financial Conduct Authority (FCA), daring to bring criminal money laundering charges against Natwest.
The decision to steam ahead by fresh chief executive Nikhil Rathi indicates that regime change could mark a new era of activism.
If that is the case then Neil Woodford, subject of a probe into the implosion of his investment empire, better look out. Even Greensill, which so far has managed to slip between the cracks in UK regulation of shadow banks, could be in the firing line.
New sheriff in town? FCA chief exec Nikhil Rathi’s decision to charge Natwest with Money Laundering indicates that regime change could mark a new era of activism
The decision to launch charges will not be very comforting for chief executive Alison Rose who has been seeking to establish a gentler and kinder Natwest and escape the tawdry past of Fred Goodwin’s Royal Bank of Scotland.
With unfortunate timing it has just issued its 2020 environmental, social and governance (ESG) report proclaiming ‘positive change’ for stakeholders.
The easy escape clause for Rose is that the £365million of allegedly dirty money which flowed through client accounts took place between 2011 and 2016, long before she took the helm.
It may be a bigger embarrassment for chairman Howard Davies who took charge in 2015 and happens to have been the first chairman of the FCA.
The background to the case is murky but is understood to be related to what was described in court in 2019 as a ‘sophisticated’ money laundry operation connected to Bradford jeweller Fowler Oldfield.
The maximum penalty is an unlimited fine. Whether UK courts would seek the kind of £1.2billion penalties imposed on HSBC by the US in 2012 over the laundering of drug money through its Mexican branches, is a moot point.
Natwest is, after all, still 62 per cent-owned (at arms-length) by the UK taxpayer. Disclosure of the criminal charges knocked the stock and possibly postpones the return of all the shares to the stock market.
The failure of Natwest to spot millions of pounds mysteriously flowing into accounts does not speak well of procedures.
The only mitigating circumstance is that in this period successive chief executives Stephen Hester and Ross McEwan had their hands full offloading dross inherited from Goodwin, and desperately were seeking to keep the enterprise afloat.
With billions of pounds of assets and bad debt being sold, the money laundering might have been missed. More significant is that the FCA is signalling that it no longer wants to be seen as a patsy which postpones criminal and disciplinary action in the hope that the trouble passes.
The list of audit mishaps – Co-op Bank, Autonomy, Carillion, Patisserie Valerie, Lookers – is endless. Slow, bureaucratic and feeble regulation by the Financial Reporting Council is legendary.
That is why former Treasury mandarin John Kingman recommended a wholesale shake-up in 2018 and the creation of an audit reform and governance authority with powers to punish directors as well as auditors.
A second report from the Competition and Markets Authority wanted audit and consulting functions of the big audit firms separated, and a third report by former London Stock Exchange chairman Donald Brydon recommended wholesale reform.
Successive business secretaries (and there have been four in as many years) have shown no urgency in bringing reforms to fruition. So it is encouraging that current incumbent, Kwasi Kwarteng, aims to publish his plans tomorrow as part of an effort to keep capitalism clean.
So far, so good – except indications are that there won’t be legislation until 2023.
Out of control
Private equity-backed Allied Universal has finally seized control of one of Britain’s biggest employers, G4S.
Great for get-rich-quick chief executive Ashley Almanza and greedy hedge funds and financial players who flooded on to the register.
But who will be held responsible if there is a security failure as at the London Olympics, a problem at HMP Wellingborough in Northamptonshire or an incursion at a sensitive national security site?
We saw what happens when there is ownership without responsibility, when Ferrero closed 61 Thorntons outlets this week.
ESG mavens and government shouldn’t be complacent about any of this.