There’s a rule that banks have to follow, which sounds simple in theory but is far harder in practice. “Know Your Customer” is a principle demanded by financial authorities to prevent money-laundering and other transgressions by clients. According to UK regulators, Commerzbank’s London business doesn’t know its customers well enough.
A review by the Financial Conduct Authority found that the UK branch of Germany’s second-largest bank has been deficient in applying “financial crime controls,” several people familiar with the matter told Handelsblatt. In other words, the division charged with screening potential customers has done a rather poor job of it.
The FCA has warned Commerzbank that it must take immediate action to fix the problem. Sources said Commerzbank management has immediately instructed staff to freeze business with customers that the FCA claimed had not been subject to adequate checks. That swift reaction has angered some employees and touched off “intense discussions” at the bank, according to one staffer, but Commerzbank has reason to be worried. UK authorities haven’t been shy in the past about penalizing financial firms they believe are flouting the rules.