In what it describes as "exceptional circumstances" the FCA has issued a Final Notice against Mohammed Ataur Rahman Prodhan, a former Chief Executive Officer of Sonali Bank (UK) Limited (SBUK).
Mr Prodhan is a Bangladesh National who relocated to the UK in April 2012 to be appointed the CEO and company secretary of SBUK. He returned to Bangladesh in May 2015 to work in senior roles in the Bangladesh financial sector and retired in August 2022.
In 2010, as part of thematic work considering financial crime controls at smaller firms, the FCA (then called the Financial Services Authority – FSA) visited SBUK and notified it of serious concerns about SBUK's AML controls. A follow up visit by the FCA in January 2014 identified further concerns and a skilled person was appointed. In July 2014 that skilled person reported that there were "systemic" AML failings arising from "a lack of understanding and implementation of systems and controls throughout the Bank." As a result, the FCA appointed investigators on 30 September 2014.
In April 2016, following settlements with SBUK and its MLRO, Steven Smith, the FCA issued final notices which imposed fines on both. The FCA imposed a restriction on SBUK preventing the acceptance of deposits for 168 days and prohibiting Mr Smith from performing the MLRO or compliance oversight functions at regulated firms.
The FCA also sought to impose a fine on Mr Prodhan, and two years later, in May 2018, following a hearing before the FCA's regulatory decisions committee (RDC), the FCA issued a decision notice against Mr Prodhan imposing a financial penalty of £76,400. The FCA found that Mr Prodhan had failed to take reasonable steps to ensure that AML risks were adequately identified, assessed, and documented and that he had relied on information and assurances provided by the MLRO without carrying out independent checks. Mr Prodhan breached statement of Principle 6 (exercising due skill, care and diligence in managing the business of the firm for which he was responsible) and was knowingly concerned in SBUK's breach of Principle 3 "A firm must take reasonable care to organise and control its affairs responsibly and effectively, with adequate risk management systems." We reported on that decision in Enforcement Watch 27.
Following service of the decision notice Mr Prodhan referred the notice to the Upper Tribunal for a fresh hearing.
Some four years after that reference, and eight years after first appointing investigators, the FCA and Mr Prodhan have entered into a settlement agreement whereby Mr Prodhan has withdrawn his reference to the Upper Tribunal and agreed to accept a public censure in substitution for the £76,400 penalty. In the published Final Notice, the FCA explains that "were it not for the exceptional circumstances in this matter, the Authority would have sought to impose a financial penalty of £76,400 on Mr Prodhan". Although of course, this was without any determination by the Tribunal.
The facts and matters set out in the Final Notice largely mirror those in the original Decision Notice and so it appears that the settlement between Mr Prodhan and the FCA has not substantively changed any findings.
The exceptional circumstances referred to by the FCA to justify the settlement were that
- Mr Prodhan has returned to Bangladesh where he now resides. As a consequence, Mr Prodhan has no residual links to, nor assets in, the UK;
- Mr Prodhan recently retired from employment;
- Mr Prodhan has ongoing personal conditions which limit his ability to travel to the UK, to participate in a hearing of the Reference or otherwise; and
- the length of time which has elapsed since Mr Prodhan’s misconduct (some 10 years) contributes to an increasing risk of the Reference not being able to be determined fairly.
In its press release, the FCA explained that delays to the tribunal procedure were as a result of the pandemic and limitations on Mr Prodhan's ability to travel.
The FCA's Director of Enforcement, Mark Steward, explained that "While a financial penalty was appropriate in this case, prolonged litigation to enforce a penalty that is unlikely to be paid against a person who may not be able to travel to the UK to explain himself in person to the Upper Tribunal is neither practical nor fair. In these exceptional circumstances, a public censure is an appropriate resolution of the case."
Comment
This is an unusual outcome and, in many respects, somewhat surprising – particularly with regard to some of the factors which the FCA uses to justify entering into the regulatory settlement with Mr Prodhan. The fact that an FCA debt may be difficult to collect would not ordinarily justify a regulator agreeing with a subject not to impose a penalty. Regulators do not impose penalties to generate revenue - their purpose is in part to act as a deterrent to others and inability to collect is not usually a factor. Similarly, the fact that an individual has retired, could be a consideration in determining whether it is necessary to prohibit an individual from the industry as a protective measure, but it is difficult to see why it would be relevant when deciding whether to impose a penalty (unless the retirement was forced by the subject's wrongdoing and hence a mitigating factor).
We do agree with the FCA, that an investigation and disciplinary process which takes 10 years creates a risk of a Reference not being able to be determined fairly. When the Financial Services and Markets Act 2000 came into force in 2001, the FCA had two years from when it became aware of a subject's misconduct to initiate disciplinary proceedings (by issuing a warning notice). Legislation has increased this period from two, to three and now six years and in our experience the FCA can and does take this long to conclude its investigations to the detriment of those it investigates. This case is a reminder that a lengthy process can and does lead to unfairness.