Santander is facing a £107 million penalty after the UK’s financial watchdog found “serious gaps” in its anti-money laundering (AML) controls.

The Financial Conduct Authority (FCA) said that the bank failed to properly oversee and manage its AML systems between December 2012 and October 2017, impacting more than 560,000 business customers.

According to the regulator, Santander failed to roll out effective systems to verify the information provided by customers about the business they would be doing.

Meanwhile, the bank did not effectively monitor the money being deposited into customer accounts.

In one case, a new customer opened an account as a small translations business with expected monthly deposits of £5,000. Within six months the company was receiving millions in deposits, which it was transferring into separate accounts.

While this account was recommended for closure by the bank's own AML team in March 2014, poor processes meant that it wasn't closed until more than a year later.

“Santander’s poor management of their anti-money laundering systems and their inadequate attempts to address the problems created a prolonged and severe risk of money laundering and financial crime,” said Mark Steward, executive director of enforcement and market oversight, FCA. “As part of our commitment to prevent and reduce financial crime, we continue to take action against firms which fail to operate proper anti-money laundering controls.”

The financial authority identified a number of other business banking accounts which were not managed correctly, which it says left the bank open to "serious money laundering risk". These failures led to over £298 million passing through the bank before it closed the accounts.

"We are very sorry for the historical Anti-Money Laundering (AML) related controls issues in our Business Banking division between 2012-17 highlighted in the FCA’s findings," said chief executive of Santander UK, Mike Regnier. “While we took action to address our AML issues once they were identified, we accept that our AML framework at the time should have been stronger."

The chief exec said that the bank has made significant changes to address these issues by overhauling its financial crime technology, systems and processes.

Earlier this year, the FCA announced plans to fine Barclays £50 million after it failed to inform the market and its shareholders about £322 million worth of fees paid to certain Qatari investors.

The Financial Conduct Authority (FCA) said that, during the height of the financial crisis, the bank did not disclose arrangements made in June and October of 2008 as part of its capital raisings

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