Luxembourg’s financial regulator, the Commission de Surveillance du Secteur Financier (CSSF), has fined BGL BNP Paribas three million euro for “severe breaches” in professional standards regarding the fight against money laundering and counter-terrorist financing.
The fine, imposed in May and announced on Monday, follows an inspection from May to November 2021.
The fine is one of the largest on record in Luxembourg after CSSF imposed a record, 4.6 million euro penalty on Banque Internationale à Luxembourg in 2020 for similar breaches of anti-money laundering and terrorist financing rules. In March last year, CSSF issued a 1.56 million euro AML fine on Belgian bank Degroof Petercam, which was the second-biggest fine until now. CSSF in 2022 imposed a total of 5.9 million in AML fines.
Financial supervisors elsewhere have in recent years also slapped fines on BNP Paribas for similar failings. In July last year, the Belgian central bank presented it with a fine of 15 million euro for ‘egregious’ AML failings between 2014 and 2019. In 2014, BNP agreed a 8.9 billion dollar settlement with the US government for illegally processing financial transactions for Cuba, Iran and Sudan, countries subject to U.S. economic sanctions.
Inspection findings
The CSSF on Monday said it identified severe deficiencies in BGL BNP Paribas› anti-money laundering and terrorist financing practices, particularly concerning a group of high-risk clients.
Key issues included:
- Insufficient due diligence: The bank failed to adequately investigate the source of funds and wealth for high-risk clients, lacking comprehensive documentation. This failure breaches Luxembourg’s AML/CFT regulations requiring thorough client background checks.
- Inadequate transaction monitoring: The bank did not effectively monitor transactions, failing to identify unusual or suspicious activities. This is a breach of regulatory requirements mandating continuous scrutiny of client transactions.
- Failure to report suspicious activities: Despite adverse media coverage of some clients, the bank did not promptly report suspicious activities or transactions to the Cellule de Renseignement Financier (CRF), Luxembourg’s financial intelligence unit. This contravenes rules requiring immediate reporting of any suspicious financial activities.
- Improper termination of relationships: BGL BNP Paribas allowed high-risk clients to transfer assets by terminating relationships without notifying the CRF financial intelligence unit, violating regulations that prohibit such actions without prior notice.
- Inappropriate client communication: Some employees informed clients about transaction blocks imposed by the CRF, further breaching AML regulations.
Bank underlines cooperation
BGL BNP Paribas said that it fully cooperated with the CSSF investigation and has taken steps to address the issues. «BGL BNP Paribas fully cooperated during the investigation and took immediate corrective measures regarding the findings identified by the CSSF. In this context, the bank set up an overall action plan and implemented remediation measures during and after the inspection,» a spokesperson for the bank said in an email.
CSSF said that in determining the fine, it also considered the level of cooperation of the bank with Luxembourg’s CRF and the fact that corrective measures were initiated.
BNP Paribas became the major shareholder of Luxembourg’s BGL in 2009, following the Great Financial Crisis. In 2018, its BGL unit acquired the Luxembourg business of Dutch bank ABN Amro.
Luxembourg’s CSSF in recent months has issued several fines and reprimands over AML failures also to several investment fund managers in Luxembourg.
The grand duchy’s banking sector is now grappling with substantial hurdles in adhering to anti-money laundering regulations, a recent consultancy report by PwC has said. The industry is struggling to recruit qualified personnel and invest in advanced tools necessary to meet these stringent compliance standards.