FCA hits firm with £6.5m fine after series of financial crime failures

City watchdog said ADM Investor Services’ failures ‘put it at risk of being used to facilitate financial crime’.

ADM Investor Services International has been fined by the FCA (Aaron Chown/PA) (PA Wire)

An investment company that failed to do proper checks on its customers despite being given two years to get its house in order has been fined £6.5 million by the City watchdog.

The Financial Conduct Authority said that despite warning ADM Investor Services International in 2014 that its systems were not up to scratch, the company had not made sufficient improvements by 2016.

ADM Investor Services is a subsidiary of an American company. It had more than 2,000 business and personal customers including asset managers and wealthy people who used it to trade grains, energy, currency and other commodities.

The FCA said its 2014 review found concerns about ADM’s anti-money laundering systems, and it warned the company to improve.

The FCA said an internal review had also warned in early 2014 that the company’s policies for complying with the law had not been updated in a formal way for six years.

Taken together these things should have spurred the company to make changes, but “during a 2016 firm visit, the FCA found significant failings remained”, the watchdog said.

The FCA said the company’s anti-money laundering policy document had been revised in 2012 and 2013, but was identical to the 2003 version despite the law changing in that time.

One section of the document referred to the Money Laundering Regulations 1993 and Money Laundering Regulations 2001. But these regulations had been replaced in 2004 and again in 2007, the FCA said.

“This meant the policy referred to regulations which were around 12 years out-of-date and had since been replaced twice. This was important,” the regulator said.

The document said that a client’s corporate structure could awaken suspicions of money laundering, but did not mention that the country where they operate could increase risks.

These failings continued even after the firm had received clear warnings on the need to improve its systems

Therese Chambers

ADM had a “jurisdiction red list,” which said that the company “should not be soliciting client(s)” from the countries on the list. But in 2016 the FCA found that there were 37 open accounts with clients linked to countries on that list.

The FCA said ADM’s internal auditors had repeatedly, in 2010, 2012, 2014 and 2015, warned of inadequacies.

After one of these warnings, in 2014, “the firm replied that it had engaged external compliance consultants to undertake a ‘thorough review’ of the policies and procedures by the end of June 2014. This did not occur”.

After assessing how much it should fine ADM, the FCA decided to take 15% of its relevant revenue. But this fine, £16.8 million, was considered disproportionately high and was halved.

ADM agreed to pay the fine at an early case so got another discount, bringing the total to £6.5 million, the regulator said.

Therese Chambers, 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.”

ADM said: “While no actual harm was identified, ADMISI recognises that the systems in place to mitigate those risks during this period fell short of the expected standards.

“On identification of the situation, we acted swiftly to make the changes necessary and ensure appropriate policy and procedural updates.

“ADMISI is pleased that the issue has been resolved and is confident in the actions put in place to meet all regulatory requirements.”