FCA Imposes $20 Million Fine on Metro Bank for AML Negligence

On November 12, 2024, Metro Bank (MTRO.L), was fined 16 million pounds ($20.51 million) by the UK’s Financial Conduct Authority (FCA) for failing in its AML controls from June 2016 to December 2020.

“The bank lacked necessary controls and procedures to effect close monitoring of nearly 60 million transactions i.e., approximately £51 billion for the risk of money laundering”, the FCA stated.

“In 2016, Metro Bank automated its transaction monitoring system; however, due to a malfunction in the system it couldn’t track the transaction while opening an account.”

“Over seven years, Metro’s failings risked a gap being left in our defense against the criminal misuse of our financial system. Those failings went on for too long, ”

Therese Chambers

Launched in 2010 to challenge Britain’s large incumbents, the bank has seen trying times in recent years forcing it to take the rescue package in October. However, the 4th quarter is expected to be a quarter of high profit.

“The resolution of these queries draws a final line under this legacy issue and thus allows the bank to move on, fully focus on the future, and build on the solid foundations already laid.”

Daniel Frumkin, Metro Bank CEO

Background of Metro Bank FCA Fines in 2023

In January 2023, Metro Bank was fined £10,002,300 by the FCA for a breach of Listing Rule 1.3.3R under the FCA, for the dissemination of false information.

£223,100 to Craig Donaldson, the CEO, and £134,600 to David Arden, the former CFO for being knowingly involved in the situation. Not only this but the Upper Tribunal has been presented with the Decision Notices issued to both of them.

On 24 October 2018, Metro Bank listed a statement to declare that RWA in the Q3 trading on, 30 September 2018, was 7,398 million pounds and that this data is related to shareholders & Metro Bank’s enterprise, stated media source.

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Donaldson and Arden knew that the statements by Metro Bank weren’t accurate so they dealt with the situation by directing the authorities’ attention to 50% RWA rather than 100% that applies to the commercial loans given by real estate.

Additionally, Metro Bank & Arden were overlooked during the declaration; they knew that the required adjustment for the RWA number would be minor; nonetheless, the latter announced the news.

On 11th September 2018, a consultant assured Metro Bank that CLIP Loans should be risk-weighted at 100%. They admitted that “Metro Bank and Mr Arden in particular knew that the application of the 50% risk weighting to CLIP Loans was wrong.”

In the same year, Metro Bank accepted that it was wrong. Upon the announcement, Donaldson and Arden attended “Risk Policy, Appetite Committee, and Risk Operating Committee meetings” at which a paper circulated stating that rectification of the RWA error about CLIP Loans would increase RWA by £574 million.

Additionally, in December 2018, the consultant sent an email to Arden declaring the problem had been identified in the calculation of RWA and the purpose was to expand RWA by £0.9 billion to £1 billion and to raise capital by £100 million, says media.

Then, RWA’s were raised to £8.9 billion on Metro Bank’s FY18 Results “Preview and Trading Update” announced on 23 January 2019. However, Metro Bank qualified or recanted the October announcement only then.

Metro Bank’s share price fell by 39% which is the sharpest single-share price fall a UK bank has suffered since 2009.

Metro Bank’s Share Current Standing

“The bank has turned to higher-yielding specialist mortgages and commercial lending,” said Frumkin.

Metro Bank’s shares rose 128% this year, compared with a 0.5% drop for the benchmark FTSE 100 index.

As per the press release, the FCA continues to supervise institutions to ensure that they have the right systems and controls to manage financial crime risks.