The Financial Conduct Authority (FCA) said the bank had failed to put anti-money laundering policies and procedures in place.
Sonali Bank has been fined £3.3m and its top anti-money laundering official, Steven Smith, has been banned from any job in banking.
But its main source of business, remitting cash to people in Bangladesh, remains unaffected.
Sonali Bank currently has three UK branches in London, Birmingham and Bradford, which are aimed at serving the British Bangladeshi community.
The Bangladeshi government owns 51% of the bank.
An FCA investigation concluded that Sonali Bank’s failure to implement adequate controls against potential money laundering had occurred despite previous warnings from the regulatory body dating back to 2010.
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“Sonali Bank failed to maintain adequate anti-money laundering (AML) systems between 20 August 2010 and 21 July 2014,” said the FCA.
“The FCA found serious and systemic weaknesses affected almost all levels of its AML control and governance structure, including its senior management team, its money laundering reporting function, the oversight of its branches and its AML policies and procedures.
“This meant that the firm failed to comply with its operational obligations in respect of customer due diligence, the identification and treatment of politically exposed persons, transaction and customer monitoring and making suspicious activity reports,” the FCA added.
Failings
To worsen matters, Sonali Bank also failed to inform the FCA for nearly two months of an allegation of “significant fraud” against one of the bank’s customers.
The bank’s board and senior management were criticised for failing to take anti-money laundering procedures seriously.
Mr Smith, the bank’s money laundering reporting officer, was personally fined £17,900.
Despite the fact that he had been overworked, the FCA found that Mr Smith was responsible for failing to heed warnings from the bank’s own internal auditors.
The regulator said that he also failed to put proper AML measures in place; did not notice that bank staff were unaware of what to do about money laundering; told his own board and senior management that procedures were working when they were not; and failed to recruit more staff when he should have done so.
Sonali Bank announced in December 2015 that it would stop taking on any new non-business customers and it will operate only two branches by the end of 2016.
The FCA said the bank had agreed to improve its AML controls, including taking on new managerial staff, utilising external experts and giving staff adequate training.
Sonali Bank was allowed to resume banking operations in Britain in 2001 after its operations had been closed down in 1999 because of accusations of serious irregularities.
