UK banks and Post Office launder a UK company's £1.3 billion of drug money.
In April 2023, it was reported that:-
- Inadequate AML procedures at Santander allowed a middleman linked to Colombian cartels to move £1.3 billion through UK banks and Post Offices.
- The recent Beltcastle money laundering scandal has sent shockwaves through the financial industry, highlighting the alarming gaps in anti-money laundering (AML) measures and regulatory oversight.
Beltcastle, which the FCA authorised for eight years, put about £1.3 billion in cash through the UK Post Office. Belcastle was also a client of Bank Santander and other banks.
And despite knowing about cash-based money laundering:-
- HM Revenues & Customs (HMRC) [regulates the Post Office for AML purposes] has yet to act.
- The FCA [regulates Santander Bank UK for AML purposes]
- Fined Santander Bank UK £107,793,300 [8 December 2022]
- Omitted mention of money laundering through the Post Office in the Santander final notice despite and
- Has NOT issued public guidance or warnings to firms about Post Office money laundering risk.
Beltcastle was dissolved in 2018, according to Companies House. The firm was closed by the FCA (according to a former Beltcastle employee), but an FCA final notice describing the circumstances of its closure cannot be found.
SOME KEY FACTS ARE INCLUDED BELOW FOR YOU.
BELTCASTLE AND Santander Bank UK
1. According to reports and those with knowledge of the case, the FCA used Beltcastle to illustrate the failures behind Santander Bank UK's £107 million fine
2. Santander Bank UK received a request about Beltcastle on September 9, 2015, which included information that Beltcastle was suspected of significant money laundering.
3. Beltcastle was onboarded at Santander in May 2013 and was able to move £269 million through its account between 2013 and 2016, the FCA final notice said. With other customers, £298 million was transacted without any suspicions.
4. Beltcastle, a payments service provider, is "Customer A" featured in the Financial Conduct Authority's (FCA) final notice in December 2022
BELCASTLE AND THE POST OFFICE
- The Post Office was used in the suspected Beltcastle laundering scheme, passing thousands of pounds regularly from Beltcastle through its cash collection and processing service,
- The Post Office raised no suspicious activity reports (SARs) on Beltcastle transactions.
OTHER BANKING RELATIONSHIPS – BELTCASTLE HAD ACCOUNTS AT BARCLAYS, NATWEST, AND GHANA INTERNATIONAL BANK.
- Beltcastle banked at Barclays, according to a website associated with the firm and Companies House, the UK corporate register.
- The latter shows Barclays has a deed of charge over credit balances dating to 2007 related to CONDOR SERVICES LTD, a Beltcastle-associated company.
- It is not known when Barclays de-risked [exited] Beltcastle.
- Beltcastle had other UK accounts, including NatWest and Ghana International Bank. The FCA has fined these institutions for different financial crime systems and control failures in the past two years (GHIB fine).
- In December 2021, NatWest was fined £265 million after it pleaded guilty to three counts of failing to properly monitor £365 million deposited into the account of a Bradford jeweller, Fowler Oldfield.
- In June 2022 the FCA has fined Ghana International Bank Plc (GIB) £5,829,900 for poor anti-money laundering and counter-terrorist financing controls over its correspondent banking activities.
- Beltcastle's Santander account also received inbound payments from HSBC and Lloyds accounts.
- Beltcastle used these other accounts to launder drugs and cash, the police believed.
1. The FCA register shows the FCA authorised Beltcastle to provide payment services between 2010 and 2018,
2. Beltcastle's FCA authorisation was one reason Santander permitted the firm to transact despite "grounds for suspecting money laundering". (Santander final notice section 4.106, 4.107)
ADVERSE MEDIA SHOWS COCAINE CONNECTION.
- Lubin Cuenca Reyes, a former Beltcastle director listed on Companies House with significant control of Beltcastle, has been under investigation in the United States and Britain for at least two decades.
- Cuenca Reyes was the subject of a 2006 Offshore Alert concerning U.S. law enforcement's interest in UK investigations into Beltcastle for suspected money laundering.
- Santander's financial crime team's adverse media screening identified this connection in 2014, less than a year after the bank onboarded Beltcastle.
- Connections found in adverse media dating to 2006 were discounted as historic.
- According to the FCA final notice, Santander did not seek to de-risk Beltcastle despite the Colombian cartel and money laundering connections (p 35, section 4.108 FCA final notice).
- Juan Salgado, a former Beltcastle director, was jailed in 2002, and Two former Beltcastle directors were convicted of laundering money  for Colombian drug cartels active in the UK, including the Cali cartel.
- Luis Fernando Carranza Reyes, a former Beltcastle director and Lubin Cuenca Reyes' nephew, was jailed in 2004 on the back of a 2003 Metropolitan Police probe into cocaine trafficking and associated money laundering called OPERATION ANURIC.
- Carranza Reyes
- Pleaded guilty to charges related to the importation and distribution of cocaine from Colombia and the laundering of the proceeds.
- Was named in a 2005 offshore alert noting U.S. authorities were seeking information from their British counterparts concerning their investigations into Beltcastle's owners and others suspected of money laundering.
- UK law enforcement first became interested in Carranza Reyes in 2001 when he was working for Beltcastle, which also traded as Condor Services Limited in south London
- Carranza Reyes’ appeal application said:-
- "He was responsible for ensuring that very significant amounts of money obtained from the Colombian organised crime group, which was controlled in this country by [Jesus Anibal] Ruiz-Henao and [Mario] Tascon, and also from other sources was laundered back to Colombia,".
- Jesus Anibal Ruiz-Henao and his brother-in-law, Mario Tascon, were jailed in 2004 for running an operation estimated to have imported a tonne of cocaine into Britain annually in the 1990s and early 2000s.
- The Metropolitan Police launched another investigation, Operation Stormhold, into Beltcastle's and other MSBs' activities in 2015.
- According to sources, Stormhold saw:-
- Arrested 19 Beltcastle employees on suspicion of money laundering in June 2016.
- Some £3.5 million in cash was seized during the arrests.
- The Metropolitan Police, however, could not bring charges against Beltcastle and its associates.
- The case was closed without further action in 2020 because it was outside the public interest.
- a Metropolitan Police spokesperson in London said.
- "Operation Stormhold was a complex intelligence-led operation into money laundering through money services businesses (MSBs) with potential links to organised crime.
- The operation ran from 2015-2022, in partnership with other law enforcement agencies,"
- After seven years, Stormhold yielded one conviction and £2 million forfeited as proceeds of crime,
i. Dominic Thorncroft, the former chair of the Association of UK Payment Institutions, was convicted in June 2021 of an offence concerning the laundering of the proceeds of an investment fraud worth £850,000 and involving more than 60 victims.
ii. He was given an 18-month suspended sentence.
- "Other arrests were made during the operation but did not meet the evidential threshold for criminal prosecution. The operation disrupted the criminal exploitation of the sector."
- The Met does not comment on arrests where suspects have not been charged,
POST OFFICE WAS A "PARTNER."
- In 2012, when banks de-risked hundreds of MSBs, Beltcastle spotted an opportunity for the Post Office to become the banking partner to offboarded MSBs.
- Beltcastle positioned itself as a reseller of that service.
- It had a contract with the Post Office whereby its armoured cash-in-transit vans would pick up cash from its customers and bring it to the Post Office
- It would be counted and deposited into Beltcastle's multiple UK bank accounts — not just the Santander one — which it then returned to its customers.
- A Post Office spokesperson said.
- The Post Office supported the Metropolitan Police on Operation Stormhold for several years and has never been under investigation in connection with Beltcastle,
- "At the time that these offences were taking place, the Post Office operated an external cash collection and processing service and had individual agreements in place with a number of firms, from whom we directly collected cash and processed the depositing of it into bank approved accounts.
- The Post Office undertook checks to ensure that those accounts were in the same name as the service agreement we had in place and that all bank-mandated processes were followed.
- This was a service offered solely and directly to retail businesses some years before, and unrelated to the branch-based service we offer to banks today that enables their customers to do everyday banking at any Post Office,"
- It is banks' responsibility to do KYC, due diligence checks, and monitor account activity
The account remained open and unmonitored.
- Santander's transaction monitoring, criticised in the FCA final notice, first detected suspicious activity — £1.5 million passing through the Beltcastle account per month — in October 2013, but it was not investigated until March 2014.
- The FCA final notice said.
- At that time, Santander realised Beltcastle had "misrepresented the true nature of its business and appeared to be operating an MSB.
- The SAR Unit suspected funds had derived from criminal activity and recommended closing the account",
- Unfortunately, that recommendation wasn't taken care of, and the performance was not subject to further monitoring.
3. Another investigation in February 2015 also concluded that Beltcastle was an MSB, and again, it was recommended that the account be closed without deploying enhanced monitoring or controls.
4. The FCA final notice said that A decision was made to close the Beltcastle account in April 2015.
- Law enforcement instead put an account monitoring order on Beltcastle's Santander account, which came into force in October 2015,
- That was shortly after Operation Stormhold started. Despite the account monitoring order, Santander failed to monitor the account or review the need to keep the account open. The FCA final notice said (p.6, 2.20).
FCA'S BELTCASTLE INVESTIGATION & PROJECT ORFORD —
- Beltcastle was FCA-authorised between 2010 and 2018, having previously been authorised by HMRC, according to the FCA register.
- Officials said that The National Crime Agency (NCA) briefed the Joint Money Laundering Information Taskforce (JMLIT) about Operational Stormhold and Beltcastle in an April 2016 meeting that included the FCA.
- It is unclear when the FCA's Beltcastle investigation began or whether banks were warned about the firm before the April 2016 JMLIT meeting.
- The FCA ran a dual-track criminal/civil investigation — PROJECT ORFORD — into Santander concerning Beltcastle for part of the period (2012-2017), which culminated in the 2022 fine, officials said.
- The FCA's 2022 Santander final notice shows the regulator asked for information about Beltcastle ("Customer A") in December 2016 and April 2017.
FCA FINE METHODOLOGY
1. The FCA determined the seriousness of Santander's AML breach to be level 4 (which attracts a fine set at 15% of revenue over the relevant period) instead of level 5 (20%), despite suspecting this breach permitted £269 million of drug money to be laundered.
2. It is the same level allotted to Ghana International Bank in June 2022 and Barclays in 2015. Ghana International Bank's fine saw a 2.5 times uplift for deterrence, but Santander's fine did not feature any deterrence uplift.
3. The FCA final notice said.
- "Santander UK continues to undertake remedial and enhancement action and has committed significant resources to improve its AML control framework.
- The Authority acknowledges the significant work undertaken to date and senior management’s commitment to ensuring an effective and sustainable AML control framework is achieved,"
4. In 2019, a crime gang laundered £1.5 million through south London branches using mule accounts.
5. Santander was subject to an additional financial crime s 166 review in 2021, well after the relevant period (2012-2017) covered by the 2022 fine.
6. Santander benefited from a 30% cooperation discount that reduced the 2022 fine from £153,990,465 to £107 million in line with settlement procedures in its Decision Procedure and Enforcement Manual.
7. Santander is alleged to have had further AML control breaches in its retail bank related to the Project Orford investigation.
8. Those include failures in
- Screening, sanctions breaches,
- Poor management of high-risk customers, and
- A systemically weak transaction monitoring system during the same relevant period covered by the 2022 final notice.
9. According to court documents, these allegations were raised in a 2018 case against Santander. The bank disputed the allegations in this case. The case had no merit, the spokesperson said.
10. There is an overlap between the allegations in the court case and the FCA's 2022 final notice to Santander.
- It could not be ascertained what amount of detail Santander provided when it notified the FCA about the 2018 case, which occurred while the bank was under civil and criminal investigation by the FCA.
- It is also unknown whether the FCA has investigated these allegations to determine whether they were relevant to its enforcement case against Santander.
11. All regulated firms must notify the FCA about matters having a serious regulatory impact that may prejudice a continuing investigation.
- FCA principle 11 says firms should deal with their regulators openly and cooperatively and disclose anything relating to the firm that the regulator would reasonably expect notice of.
CYPRUS SHELL COMPANY
- Firms and individuals connected to Beltcastle operate today in the UK financial services ecosystem.
- Bundle Money Ltd, for example,
- Is run by an ex-Beltcastle director who bills himself as its chief executive on LinkedIn between August 2013 and July 2017.
- The FCA authorised Bundle Money in May 2018, according to the FCA register.
- Bundle Money's Companies House listing shows its person of significant control to be Aemona Holdings Limited, a Cyprus-based shell company.
i. There is no suggestion of wrongdoing by Bundle Money.
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