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EY’s Work on This One Bank Project Was So Bad They Had to Refund the Client

Blue and yellow EY signage at entrance to EY office in Canary Wharf. It is UK professional services company

Apologies in advance to that one guy in the comments who always accuses us of being mean to EY for no reason. Not our fault they end up in the headlines for stuff worth making fun of.

It appears the ever talkative “people familiar with the matter” blabbed recently to Financial Times about an EY UK consulting job gone awry. The firm was hired to solve an anti-financial crime problem that had plagued the UK arm of Santander — one of the largest financial institutions across the pond —  for years. Unfortunately people familiar with the matter were not forthcoming with the gory details, or if they were FT elected not to share them. Due to their shoddy work on the project, EY had to terminate the contract and offered the bank a refund of £15 million ($18 million USD).

Santander’s problems with its anti-money laundering systems and controls led to a £107.7 million fine from the Financial Conduct Authority last year, the FCA being the Brits’ financial services regulator. Here’s an example of a specific problem as described by the FCA in a December 2022 news release:

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

Although the account was recommended for closure by the bank’s own AML team in March 2014, poor processes and structures meant that this was not acted upon until September 2015. As a result, the customer continued to receive and transfer millions of pounds through its account.

Santander agreed to a request from law enforcement to keep the account open in September 2015, however, it failed to keep track of this request and the account remained open until the FCA wrote to Santander in December 2016.

The bank started making improvements to its AML [Anti-Money Laundering] systems in 2013 but did not adequately address the underlying weaknesses. In 2017, the bank implemented a comprehensive restructuring of its processes and systems and here’s a 2021 document outlining Santander’s extensive efforts to curb and deter financial crime [PDF]. “Our AFC [Anti-Financial Crime] Strategy is based around our aspiration to be least attractive to criminals, to be seen as a safe bank by our customers and community, and to meet and exceed regulatory expectations by having a collective, forward looking and informed view to managing financial crime risks,” reads the seven-page Santander UK Financial Crime Statement.

Right. Anyway. FT:

The work, codenamed Project Morgan, “went badly wrong over an extended period” and the financial settlement dented the results of the consultancy’s UK financial services division for its most recent financial year ended in June, said one of the people.

It is not clear whether the work has been brought in-house by Santander or handed to another firm.

The amount refunded to Santander is equivalent to the annual pay of about 19 of EY’s UK partners, who were each paid an average of £803,000 in the 12 months to June 2022, the most recent year for which it has published financial results.

It’s unclear how much Santander paid for the contract but FT says the bank has invested £700 million over the last five years to improve its rickety AML/AFC processes and systems.

FT goes on to say that “dozens” of people on the 150-person deep team are in line to be let go though this division was already warned there would be layoffs due to a decline in client demand. See: EY warns UK staff over pay as it trims jobs from FT on August 16.

EY is still working for Santander on other stuff, said a person in the know who spoke to FT, just not this particular job. Obviously.

Santander ditched EY as financial crime consultant over alleged failings [Financial Times]