Sanctions Against Metro Bank by the FCA: AML, CFT, and KYC Failures

Nature of Identified Failures

The FCA has thoroughly outlined the significant failures of Metro Bank regarding its transaction monitoring systems and anti-money laundering (AML) efforts. These failures can be grouped into several critical points:

---

Malfunctions of the Automated Monitoring System

The core issue lies in the inefficiency of the automated system Metro Bank put in place to monitor suspicious transactions:

• Limited scope of the system:
  • The system failed to monitor over 60 million transactions, a monumental omission for a bank dealing with significant financial flows. This amounts to a total of approximately £51 billion. These unsupervised transactions included operations that could show signs of money laundering or financing of illicit activities.

• Faulty configuration :
  • The automated system used inadequate criteria to generate alerts.
  • Some key parameters essential for detecting abnormal or atypical behavior were either disabled or incorrectly configured.

• Lack of rigorous testing: :
  • Metro Bank did not perform regular and thorough tests to ensure the system was working as intended.
  • The bank failed to establish a process for periodic verification of the performance and coverage of its monitoring system.

---

Governance and Internal Procedure Deficiencies

The FCA identified poor governance within Metro Bank regarding the supervision of AML-related risks:

• Lack of senior management oversight:
  Technical and structural issues with the system were flagged by lower-level employees as early as 2017 and 2018, but these concerns were ignored or minimized by senior management. Operational staff repeatedly reported that the system configurations did not ensure reliable detection of suspicious transactions.
• Ineffective communication:
  Internal reports were not properly escalated to senior management or risk management committees. This led to delayed reactions and slow corrections of the identified issues.
• Weak control procedures:
  Metro Bank did not implement periodic independent reviews to assess the effectiveness of its anti-money laundering framework. No mechanisms were in place to proactively identify and address gaps in the automated monitoring systems.

---

Inadequate Tools for Identifying High-Risk Transactions

The FCA criticized Metro Bank for its failure to detect and handle potentially illicit transactions effectively due to:

1. The FCA criticized Metro Bank for its failure to detect and handle potentially illicit transactions effectively due to:
   • Overly broad or generic alert parameters:
     The filters used to generate alerts did not take into account risk scenarios specific to customer types or transactions. This led to a massive under-detection of high-risk transactions.
   • Lack of advanced analysis:
     The bank did not integrate behavioral analysis techniques or more sophisticated algorithms to detect complex anomalies. The system relied on outdated methods that no longer met current AML requirements.
   • Failure to adapt to new risks:
     Between 2016 and 2020, money laundering typologies evolved significantly. However, Metro Bank did not update its systems to:
     • Identify new suspicious transaction patterns.
     • Adapt parameters for sectors or clients exposed to higher risks (e.g., cross-border payments or large volumes).

---

Client Monitoring and Detection of High-Risk Profiles