By Ian Fraser
Published: Sunday Herald
Date: July 22nd, 2012
The Royal Bank of Scotland has reneged a job offer to a leading anti-money-laundering expert who it appointed to help improve anti-money-laundering systems and controls on discovering he had blown the whistle on drugs money-laundering by a former employer.
In an employment tribunal to be heard in London later this year, Martin Woods will sue RBS’s Coutts private banking arm for discrimination and detrimental treatment of a whistleblower. Woods claims that Coutts tore up a signed contract of employment on discovering that he had exposed a $378 billion money laundering scandal at former US employers Wachovia Bank.
The claim comes a few days after US senator Carl Levin, chairman of the US Senate Permanent Subcommittee on Investigations, berated HSBC for turning a blind eye to money laundering on an industrial scale. Levin told the bank that unless it dramatically improved its anti-money-laundering controls, it would have its US operating licence revoked.
HSBC also faces a fine of $1 billion or more from the US authorities after being accused of allowing money-laundering for narcotics dealers, terrorists and other unsavoury characters over a multi-year period.
The FSA in March fined Coutts £8.75m and ordered it to significantly step up its efforts to prevent drugs barons, deposed dictators, organised criminals and terrorists from using the bank as a conduit and purifier for their ‘dirty’ money. The bank was censured for failing to check whether the wealth of “politically exposed persons”, code for toppled Arab dictators and their families, was legitimate.
Describing Coutts’ failings as “significant, widespread and unacceptable,” the FSA ordered it to strengthen its anti-money laundering controls and ensure money-laundering reporting officers (MLROs) had sufficient “robustness” to challenge its private bankers. But Banks and bankers have much to gain from turning a blind eye to ‘dirty’ money, earning fees of 5% to 25% for sums laundered.
“I am suing Coutts for discrimination against and detrimental treatment of a whistleblower under the Public Interest Disclosure Act and the Employment Act,” said Woods. “If I was there, I would have seen my role as being to robustly challenge their private bankers to explain their relationships with certain customers and what these customers were doing with Coutts, as set out in the FSA’s final notice.”
The RBS subsidiary, located on London’s Strand, appointed Woods as an anti-money laundering (AML) expert a year ago. Woods was interviewed by Martin Bush, a senior consultant who was running the bank’s ‘AML change programme’. During the interview Bush told Woods he was hired. In an internal RBS email seen by the Sunday Herald, the appointment was approved and Woods signed a contract on July 18 at a day rate of £650, which equates to a salary of £130,000 a year.
However, a separate internal RBS email dated July 27, 2011, sent by Bush to Coutts’ compliance director Peter Nelling, reveals that the bank chose to renege on its commitment because it “we had become aware of an incident at Wachovia, one of Martin Woods’s previous employers, and that Coutts was keen to avoid any risk of reputational damage that might relate to the incident”.
Wood believes this can only be a reference to his whistleblowing, which followed the US bank’s attempts to play down the laundering of $378 billion of Mexican drugs money. The bank, which numbers the Queen amongst its clientele, told Woods the job offer was being withdrawn the previous day, July 26.
Woods, a former National Crime Squad detective, added: “Coutts decided they didn’t want me because, they didn’t want me doing that sort of thing [blow the whistle on a Mexican drugs cartel] there.”
“To be a successful money-laundering reporting officer (MLRO) these days, you have to know which questions not to ask, said Rowan Bosworth-Davies, an ex-Scotland Yard fraud squad officer and financial regulator who is familiar with Wood’s case. “Banks don’t want MLROs with any skills, experience, or the independent knowledge to be able to stand up to the commercial people and say, ‘you can’t do that’!
Coutts has argued that, since it was not a party to the contract, which it says was the work of an external recruitment firm, Woods was never technically an employee and therefore is not eligible for protection under the Public Interest Disclosure Act and the Employment Act. The bank has also blamed its withdrawal of the job offer on the fact Woods had been “vocal” in his criticism of banks and the FSA in December 2010. Coutts is also arguing that Woods’ claim is out of time.
Woods, represented by Mark Emery, employment partner at London solicitors Withy King, argues that a number of untrue and misleading statements from Coutts, which contradict what bank officials said in internal emails, had delayed his ability to issue proceedings.
At Wachovia, Woods was praised for identifying the laundering of billions of dollars of drugs money via Mexican currency exchanges, and helping bring criminals to justice. The US Treasury’s comptroller of currency John Dugan said in March 2010 Woods “demonstrated great personal courage and integrity by speaking up. Without the efforts of individuals like you, actions such as the one taken against Wachovia would not be possible.”
Wood said: “In today’s climate everyone from Bank of England governor Sir Mervyn King down is calling for radical change in the culture of banking, But the episode suggests that Coutts has absolutely no intention of changing its culture. Nobody inside a bank that launders money for drugs cartels or terrorists is ever held accountable and no one ever goes to jail. Every time there is a fine and settlement, the bankers’ perception of the risk of providing laundry services is diminished.”
A spokeswoman for RBS said: “We are unable to comment on matters that are subject to legal proceedings”.
A version of this article was published on page 23 of the Sunday Herald on July 22nd, 2012 as s part of a package that also included my article Corruption allegations, major fraud inquiries, a senate probe into deals with drug-running gangsters in Mexico … and a luxury yacht. Welcome to the world of banking 2012 whose focus was the HBOS Reading scandal. The “RBS accused” article was not published on the Sunday Herald website.