Coutts & Company

Activities and protection

What they can do, and how you are protected

• Hold or safeguard your money FSCS may apply
  Eligible deposits are typically protected by the FSCS up to £120,000 per person, per banking group.
• Give regulated advice FSCS may apply
  A claim for unsuitable advice is itself FSCS-protected, up to the limit that applies to the product you were advised on.
• Manage or trade investments FSCS may apply
  Eligible investment and pension claims are typically FSCS-protected up to £85,000 per person, depending on the product and your circumstances.
• Sell or arrange insurance FSCS may apply
  Eligible insurance claims may be FSCS-protected, often 90%, or 100% for compulsory or long-term cover.
• Advise on or arrange mortgages FSCS may apply
  Mortgage advice and arranging may be FSCS-covered, up to the limit that applies.
• Lend or arrange credit No FSCS cover
  Consumer credit is not covered by the FSCS, so there is no compensation scheme if the firm fails.

Check your FSCS cover →

Complaints: You can refer a complaint about this firm to the Financial Ombudsman Service for free, whichever activity it relates to.

Track record

Action taken against them

3 fines between 2010 and 2012, £20.65m in total. This is part of the official register record and is worth reviewing before going ahead.

• Fined £8.75m on 28 March 2012

  On 23 March 2012 the FSA imposed a financial penalty of £8,750,000 on Coutts & Company (Coutts, or the Firm) for breaches of Principle 3 (management and control) of the FSA's Principles for Businesses which occurred between 15 December 2007 and 15 November 2010 (the Relevant Period). Coutts agreed to settle at an early stage of the FSA's investigation. It therefore qualified for a 30% (Stage 1) discount pursuant to the FSA's executive settlement procedures. Were it not for this discount, the FSA would have imposed a financial penalty of £12,500,000 on Coutts. Coutts breached Principle 3 because it failed to take reasonable care to establish and maintain effective anti-money laundering (AML) systems and controls in relation to customers that posed a higher money laundering risk than standard customers (high risk customers). Coutts also breached the following Senior Management Arrangements, Systems and Controls (SYSC) rules in the FSA Handbook: SYSC 6.1.1R and SYSC 6.3.1R. The failings at Coutts were serious, systemic and were allowed to persist for almost three years. Coutts was expanding its customer base during the Relevant Period and staff were incentivised in part to increase the number of customers taken on. As such, it was important that there were appropriate systems and controls in place, including with respect to the risk of money laundering. The weaknesses in Coutts' controls resulted in an unacceptable risk of handling the proceeds of crime. In particular, the Firm did not: i.assess adequately the level of money laundering risk posed by prospective and existing high risk customers. This included failing properly to identify and record all politically exposed persons (PEPs); ii.gather the appropriate level of due diligence information about a large number of prospective high risk customers; iii.apply robust controls when establishing relationships with high risk customers. In particular, the AML team failed to provide an appropriate level of scrutiny and challenge; iv.consistently apply appropriate ongoing monitoring to its existing high risk customers to ensure that changes in circumstances and risk profiles were identified, assessed and managed appropriately and that all unusual transactions would be identified; and v.carry out adequate reviews of its AML systems and controls for high risk customers. The FSA reviewed 103 high risk customer files and identified deficiencies in 73 files (71%) as a result of the Firm's failure to gather appropriate due diligence when accepting a new customer and/or the Firm's failure to conduct appropriate ongoing monitoring of existing customers. Specifically, the FSA identified that Coutts had failed to do one or more of the following in each of the 73 files: vi.gather sufficient information about its prospective PEP and other high risk customers to establish their sources of wealth and income; vii.establish the source of the funds received at the outset of the high risk customer relationship with Coutts; viii.gather sufficient information about prospective high risk corporate customers, such as information concerning business activities, ownership and control structures and the intended purpose of the business relationship; ix.identify and/or assess adverse intelligence about prospective and existing high risk customers properly and take appropriate steps in relation to such intelligence; x.keep the information held on its existing PEP and other high risk customers up-to-date; and xi.scrutinise transactions made through PEP and other high risk customer accounts appropriately. The weaknesses in Coutts' controls resulted in an unacceptable risk of handling the proceeds of crime. The FSA considers the failings to be particularly serious because: xii.Coutts is a high profile bank with a leading position in the private banking market and is a gateway to the UK financial system for high net worth international customers. Itas particularly important, therefore, that Coutts had robust systems and controls to prevent and detect money laundering; xiii.the markets and customers that the Firm was targeting included certain jurisdictions with AML requirements which were not equivalent to those in the UK and which carried an inherently high risk in respect of money laundering; xiv.the Firm provided financial services to a large number of high risk customers, the number of which approximately doubled during the Relevant Period, and it handled considerable sums of money on behalf of those customers; xv.the failings persisted for a period of almost three years; xvi.the failings were not identified by the Firm; xvii.the Firm, along with three other institutions within The Royal Bank of Scotland Group, was fined in August 2010 for failing to put in place adequate financial crime systems and controls, in that case in relation to UK financial sanctions; and xviii.the failings in this Notice also occurred in a period during which the FSA successfully brought and published other Enforcement cases against a number of institutions for shortcomings in their financial crime systems and controls. As such, the Firm ought to have been aware of the importance of systems and controls to prevent and detect all types of financial crime, including money laundering. Coutts' failings merit the imposition of a significant financial penalty. In deciding upon the appropriate level of penalty, the FSA has taken the following into account: xix.RBS Group had commenced a group-wide review of AML systems and controls prior to the FSA visit, which had been due to encompass a review of Coutts' AML systems and controls in November 2010, but which was suspended as a result of that visit; xx.once the FSA had identified concerns, the Firm took steps to address deficiencies in its AML systems and controls, including engaging a third party consultant to review and overhaul its AML processes, revise its training programme for private bankers and review its PEP and other high risk customer files; xxi.as a result of that review, a number of improvements and recommendations have already been, or are being, implemented. These include significant remedial amendments to the Firm's PEP and other high risk customer files to ensure that appropriate due diligence information about its customers has been assessed and recorded. The Firm has also exited a number of high risk customer relationships; and xxii.since the discovery of the failings in October 2010, Coutts and its senior management have co-operated fully with the FSA's investigation and demonstrated commitment to identifying areas for improvement in the Firm's AML systems and controls and overseeing the implementation of those improvements.

• Fined £6.3m on 8 November 2011

  On 7 November 2011, the FSA imposed a financial penalty of £6,300,000 on Coutts & Company. The penalty is in respect of Coutts' failure to comply with Principle 9 in connection with its sale of the AIG Life Premier Access Bond and Premier Bond, Enhanced Variable Rate Fund (the Fund) between 3 December 2003 and 15 September 2008 and its compliance review of those sales between October 2008 and July 2009. Coutts failed to take reasonable care to ensure the suitability of its advice and discretionary decisions for any customer who was entitled to rely upon its judgement. Coutts agreed to settle at an early stage of the FSA's investigation. It therefore qualified for a 30% (Stage 1) discount under the FSA's executive settlement procedures. Were it not for this discount, the FSA would have imposed a financial penalty of £9 million on Coutts. In particular, Coutts: (1) failed to have an adequate sales process in place for the Fund. Coutts' advisers were not provided with adequate training on the Fund and its features and risks were not sufficiently explained to them. Nor did Coutts' sales documentation accurately or adequately describe the Fund and its risks. As a result, customers were exposed to an unacceptable risk of an unsuitable sale of the Fund; (2) recommended the Fund to some customers even though it may not have provided them with the level of capital security they appear to have required. In other cases, it should have advised customers in relation to their competing investment objectives and made them sufficiently aware of the trade-off between the Fund's risks and returns. Many customers were advised to invest a large proportion of their overall assets in the Fund and there is a risk that their investments were not appropriately diversified; (3) generally informed customers that the Fund was a cash fund which invested in money market instruments and could be seen as an alternative to a bank or building society account. However, a significant proportion of the Fund was invested in assets which did not meet this description and customers may have misunderstood the true position about the risks they were assuming; (4) failed to respond appropriately to the changing market conditions in late 2007 and during 2008 when there was a greater risk of the Fund suspending redemptions and of customers suffering a loss. Despite having been aware of these issues affecting the Fund, Coutts failed to make the necessary changes to the way in which it sold the Fund, and did not ensure that advisers who sought to reassure existing customers inquiring about their investment in the Fund provided a fair explanation of the risks. Nor did Coutts properly deal with questions raised from December 2007 around its past sales of the Fund, including about whether it had explained the Fund's risks to customers adequately and whether their investments were appropriately diversified; and (5) failed to undertake an effective compliance review of its sales of the Fund after the Fund was suspended and customers complained. The review failed to adequately address suitability and disclosure issues and was not completed in a timely manner. As a consequence of the above failings, Coutts' customers were exposed to an unacceptable risk of an unsuitable sale of the Fund over the Sales Period. At the time of the Fund's suspension on 15 September 2008, 247 Coutts customers had £748 million invested in the Fund. Of these, 93 customers have complained. The FSA has considered the disciplinary and other options available to it and has concluded that a financial penalty is the appropriate sanction in the circumstances of this particular case. Following discussions with the FSA, Coutts has agreed to implement a comprehensive past business review of its sales of the Fund. This will, where necessary, include contact with customers who may have been adversely affected by Coutts' failings. The review will be overseen by an indepeent third party. Coutts will compensate all customers who have suffered loss as a result of any failings on its part. Since the commencement of the FSA's investigation, Coutts and its senior management have worked in an open and cooperative manner with the FSA.

• Fined £5.6m on 9 August 2010

  On 2 August 2010 the FSA imposed a financial penalty of £5,600,000 on four members of the Royal Bank of Scotland Group (RBSG) for breaches of the Money Laundering Regulations 2007 (the Regulations) which occurred between 15 December 2007 and 31 December 2008. The breaches related to the systems and controls put in place by RBSG to prevent breaches of UK financial sanctions. RBSG agreed to settle at an early stage of the FSA's investigation. It therefore qualified for a 30% (Stage 1) discount under the FSA's executive settlement procedures. Were it not for this discount, the FSA would have imposed a financial penalty of £8,000,000 on RBSG. RBSG failed to consider properly what policies and procedures were required to comply with their obligations under the Regulations and the UK financial sanctions regime. Consequently, RBSG failed, for an extended period of time, to put in place adequate systems and controls to screen both its customers and the payments they received against the list of sanctioned entities maintained by HM Treasury (the Treasury list). In particular, RBSG failed to establish and maintain appropriate and risk-sensitive policies and procedures relating to the following matters: (1) RBSG failed properly to implement and oversee the systems used to screen relevant customers and payments against the Treasury list. As a result, notwithstanding that RBSG were one of the largest processors of foreign payments among UK banks, they did not screen the following cross-border payments: (a) any incoming payments to customers; (b) Sterling payments made by customers (except those going to US based institutions); and (c) Euro payments made by customers (until 9 June 2008). Whilst these issues were identified by RBS Group Security & Fraud (GS&F) within RBS Group's Manufacturing Division, and GS&F had put in place a plan to address them, such actions were not taken in a sufficiently timely manner. (2) RBSG's automated screening failed to screen the majority of trade finance SWIFT messages generated in the international trade transactions that it carried out. (3) RBSG did not consistently record sufficient information relating to the directors and beneficial owners of its corporate customers. Where information relating to directors and beneficial owners was recorded, RBSG failed to ensure that such individuals were screened against the Treasury list on an ongoing basis. (4) After the screening systems used to check customers and payments against the Treasury list had initially been set up, RBSG failed to ensure that the design and implementation of the 'fuzzy matching' capabilities in the screening software - used to identify close matches to the Treasury list - continued to operate satisfactorily. After the initial set up, the results produced by the screening filters were not routinely reviewed or monitored by RBSG to ensure that they were appropriate. This meant that over time the 'fuzzy matching' parameters initially set by RBSG became significantly less effective at identifying potential matches. The lack of adequate policies and procedures in respect of these matters gave rise to an unacceptable risk that RBSG could have breached the UK financial sanctions regime. The FSA considers these failings to be particularly serious because: (1) The involvement of UK financial institutions in providing funds, economic resources or financial services to designated persons on the Treasury list undermines the integrity of the UK financial services sector. Unless they have in place robust systems and controls, UK financial institutions risk being used to facilitate transactions involving sanctions targets, including terrorist financing. As the Joint Money Laundering Steering Group (JMLSG) guidance advises, small amounts of funding could be sufficient to finance terrorist activities and hence the sanctions-related systems and controls implemented by firms need to be robust enough to capture sucpyments. The FSA's financial crime and market confidence statutory objectives are both endangered by firms' failures in this area. Adequate systems and controls relating to financial sanctions is an integral part of complying with the FSA's requirements on financial crime. (2) The systems and control failings at RBSG presented a serious risk to the FSA's financial crime and market confidence statutory objectives. During 2007, the London division responsible for processing payments for RBSG dealt with the largest volume of foreign payments of any financial institution in the UK. For example, it processed £7.6 trillion of inward Euro payments and £8.6 trillion of outward Euro payments, across a total volume of 1.8 million payment transactions. (3) RBSG, through GS&F, were aware of deficiencies in the screening systems used during the Relevant Period but did not act on these deficiencies in a timely manner. This contributed to the above failings in systems and controls remaining in existence for one year and not being remedied earlier. For example, GS&F raised issues relating to their sanctions screening software with the software provider but failed to ensure that these issues were resolved promptly. Further, after GS&F instructed a leading firm of accountants in early 2008 to carry out an independent review to benchmark RBSG's screening software against a peer group, the key issues identified in the review were not appropriately escalated and as a result were not considered by the relevant committees within RBSG who would have overseen remedial action. The required remedial action was not taken until a number of months later. RBSG's failings therefore merit the imposition of a significant financial penalty. In deciding the level of disciplinary sanction, the FSA recognises that RBSG have taken action to mitigate the seriousness of their failings, including: (1) once the failings came to the attention of the current management within RBSG, they promptly reported them to the FSA; and (2) RBSG took expedient and appropriate remedial action in respect of screening payments, improving the effectiveness of the software and improving governance and oversight of UK sanctions compliance. This included implementing screening of all inbound payments, outbound domestic Sterling payments, various Trade Finance messages and payments entered directly into the gateway application for SWIFT messages. Since the discovery of its failings in December 2008, RBSG and its current senior management have fully cooperated with the FSA's investigation.

Common questions

Frequently asked questions