Cartels move £1.3bn owing to poor AML procedures at Santander

Cartels move £1.3bn owing to poor AML procedures at Santander

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, shedding light on the alarming gaps in anti-money laundering (AML) measures and regulatory oversight. This article delves into the details of the case, highlighting the failures of various entities involved and emphasizing the urgent need for improved systems and controls within financial institutions. 

santander poor ALM procedures

The Beltcastle Scandal Unveiled

Beltcastle, a financial firm authorized by the UK regulator for eight years, has been exposed for allegedly funneling approximately £1.3 billion in cash through the UK Post Office. This illicit operation took place with the cooperation of major banks, including Barclays, NatWest, and Ghana International Bank. Astonishingly, the Post Office, responsible for anti-money laundering (AML) regulations, failed to identify any suspicious activity during the extensive transactions involving Beltcastle. 

Failures in Regulatory Oversight

The Financial Conduct Authority (FCA) came under scrutiny for its failure to update guidance regarding the risk of cash-based money laundering through the Post Office. Furthermore, several banks, including NatWest and Ghana International Bank, had not adequately adjusted their systems and controls to detect and prevent such illicit activities. Instead, the focus of financial crime teams at the time was primarily on Russian sanctions, allowing Beltcastle to continue its operations largely unnoticed. 

Banks’ Involvement and Suspicions

Notably, Beltcastle held accounts at Santander, which received inbound payments from HSBC and Lloyds accounts, raising suspicions that Beltcastle may have utilized these other accounts to launder drug money, as alleged by the police. Despite grounds for suspecting money laundering, Santander permitted Beltcastle to transact with inadequate due diligence being carried out. This is due to the firm’s FCA authorization, exposing a significant weakness in the regulatory framework. 

Background of Beltcastle’s Directors

Former Beltcastle directors, Lubin Cuenca Reyes and Luis Fernando Carranza Reyes, have been under investigation in both the United States and Britain. This was with regard to suspected involvement in money laundering activities linked to Colombian drug cartels. The investigation failed to result in charges against Beltcastle and its associates. Consequently, Beltcastle’s account with Santander remained open and unmonitored for an extended period, further highlighting systemic failures. 

The Post Office’s Role and Responsibilities

While the Post Office itself has not been investigated in connection with Beltcastle, it has supported the Metropolitan Police’s efforts in Operation Stormhold. According to the Post Office, the responsibility for conducting know-your-customer (KYC) checks, due diligence, and monitoring account activity lies with the banks. However, the scandal has exposed the pressing need for enhanced collaboration and diligence among all parties involved. 

Government Response and Project Admiralty

Recognizing the gravity of cash-based money laundering through the Post Office, the National Economic Crime Centre launched Project Admiralty, as outlined in the UK government’s Economic Crime Plan 2023-26. This initiative underscores the government’s commitment to addressing and combating economic crimes effectively. 

Penalties and the Path Forward

The FCA conducted an investigation called Project Orford into Santander concerning Beltcastle, resulting in a fine imposed in 2022. The FCA classified Santander’s breach of AML regulations as level 4, amounting to 15% of their revenue over the relevant period, instead of the more severe level 5, which would have been 20%. This penalty calculation follows precedents set by previous cases and signifies a growing determination by governments to tackle money laundering. Financial institutions must take these penalties as a clear warning and prioritize improving their AML measures. 

Ten Intelligence Thoughts

The Beltcastle money laundering scandal has exposed critical vulnerabilities in the financial system and regulatory oversight, it is possible that other banks may have to reassess their AML practices to not fall foul of similar issues.  If you think you or your company may not be following industry best practices, please get in touch with us for a no-obligation chat about how to better protect yourself and your company when it comes to AML regulations.  


Written by:

Daniel Wilkes | Associate at TenIntelligence