The failure to take reasonable care to establish and maintain effective AML systems and controls meant there was an unaccepted risk of Coutts handling the proceeds of crime.
The financial services firm was deemed to have breached Principle 3 of the FSA’s Principles for Businesses, which states firms must take reasonable care to organise and control its affairs responsibly and effectively, with adequate risk-management systems.
The FSA picked up on Coutts’ transgressions after it visited the firm as part of a thematic review into banks’ management of high money-laundering risk situations.
Following the visit in October 2010, the regulator identified that Coutts did not apply robust controls when starting relationships with high-risk customers and did not consistently apply appropriate monitoring of those high risk relationships.
The AML team at Coutts was also deemed to have failed to provide an appropriate level of scrutiny and challenge.
Tracey McDermott, acting director of enforcement and financial crime, said: "Coutts’ failings were significant, widespread and unacceptable. Its conduct fell well below the standards we expect and the size of the financial penalty demonstrates how seriously we view its failures.
"Coutts was expanding its customer base which increased the number of high risk customer relationships. The regulatory environment in relation to financial crime had also changed. It is therefore particularly disappointing that Coutts failed to take appropriate steps to manage its AML risks."
Since the FSA’s review a number of improvements and recommendations have already been, or are being implemented, the City watchdog said.
It added that Coutts had agreed to settle at an early stage and so qualified for a 30% discount; otherwise the fine would have been £12.5m.
