The Spanish Supreme Court has recently fined banking giant Santander €1 million euros due to “serious” historic AML failings relating to a single client. The fine related to due diligence failings on the now defunct Spanish property giant Rumasa. These failings resulted in €50million being laundered through the company between 2007 and 2011.
Whilst the fine is not of the magnitude recently seen for systematic AML failings, it is a reminder of the need for financial institutions to ensure historic failings are addressed and reported to ensure compliance to regulation and legislation in order to avoiding regulatory or legal sanctions.
Rumasa was once one of the biggest companies in Spain employing over 60,000 people and constituted nearly 2% of Spanish GDP. In the 1990s the group was subject to an expropriation order which resulted in a public agency taking ownership of the company. This was deemed to be in the public interest due to allegations of currency smuggling, fraud and tax evasion.
However, the company was rebuilt in the 1990s before applying for bankruptcy after having ran up debts of more than €700million by 2011 – the same period in which Santander (then Bank Banesto) was found to have facilitated the money laundering due to “serious” internal failings.
The case highlights a number of important points. Firstly, the courts and law enforcement agencies are still pursuing cases relating to historic failings which resulted in the facilitation of money laundering. Secondly, it highlights the continual need for financial institutions to ensure historic client due diligence records are reviewed and rectified where deficiencies have been identified, and where required, reported via a client remediation programme.
The AML failings of which Santander have now been found guilty in relation to Rumasa also highlight the need for an effective transaction monitoring programme. If suitable and robust monitoring of the Rumasa transactions had been in place, then Santander would have been able to identify the illicit activity and reported it to the authorities.
Where a financial institution identifies potential deficiencies in historic transaction monitoring controls then a remediation of transactions from any given period should be undertaken.
The final point of interest about this case is that the client involved in money laundering was one of the biggest companies at the time in Spain. This goes to show that the same controls and due diligence needs to be applied to all clients no matter how big or well known. It is interesting that Santander did not appear to undertake a review of historic transactions relating to Rumasa despite the amount of adverse media and legal activity to which the company was subject.