The FCA has fined futures broker ADM Investor Services International Limited (ADMISI) £6,470,600 ($7.86m) for inadequate AML systems and controls.
The regulator said that the nature of ADMISI’s business and client base presented potentially high levels of money-laundering risk. In particular, it said it was because of:
- ADMISI’s business model;
- the geographical location of its customers;
- the proportion of its business involving high-risk clients; and
- because it had had Politically Exposed Persons as clients.
The FCA had raised concerns with ADMISI in 2014 about its AML systems, including the absence of a formal process to classify customers by risk. The regulator had expected ADMISI to make improvements.
“All financial firms need to have effective anti-money-laundering checks in place.”Therese Chambers, Joint Executive Director of Enforcement and Market Oversight, FCA
However, during a 2016 firm visit, the FCA found significant failings remained. In particular:
- The firm’s AML customer risk assessment was basic and did not enable an assessment of a customer’s financial crime risk.
- It did not conduct a firm-wide money-laundering risk assessment.
- There was little evidence of adequate ongoing monitoring in the form of periodic customer reviews.
- Policies were outdated and referred to old legislation.
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.
Risk management systems
After the 2016 visit, the FCA said there were improvements. ADMISI 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. Also, by the end of October 2016, ADMISI had introduced AML policies and procedures to address the concerns identified.
After further remedial action the requirements were lifted in January 2018.
Therese Chambers, the FCA’S Joint Executive Director of Enforcement and Market Oversight, said: “All financial firms need to have effective anti-money laundering checks in place. ADM Investor Services’ failures put it 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 it qualified for a 30% settlement discount. Otherwise, the FCA would have imposed a financial penalty of £9,243,738 ($11.2m).
ADMISI operates in the futures industry providing clearing and brokerage services into all major investment markets. Headquartered in London, ADMISI is a registered Futures Commission Merchant, and facilitates over 180 million derivatives contracts a year on behalf of banks, institutional investors, corporates, trade clients, and high net worth individuals.