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EY agreed to terminate a consulting contract and refund millions of pounds to Santander’s UK business after failings in its anti-financial crime work for the bank, according to three people with knowledge of the matter.
The Big Four consultancy was one of several external advisers called on by Santander as it attempted to address financial crime and anti-money laundering systems that had drawn scrutiny from regulators, according to two of the people.
The quality of work performed by EY was so poor that the professional services giant was forced this year to offer the bank a refund of about £15mn for the project, the people said.
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.
The project’s failure has been followed by the prospect of cutbacks in EY’s UK financial crime advisory team.
Dozens of members of the 150-person division are in line to be made redundant as part of a trimming of EY’s UK financial consultancy workforce revealed by the Financial Times last month.
The failure of the Santander project has contributed to the likelihood of redundancies in the team, according to two people familiar with the matter.
However, a person close to EY’s management said the decision to place staff in the division at risk of redundancy, which is subject to consultation, had been driven by wider market demand. The firm continued to work for Santander on other matters around the world, the person added.
The UK’s Financial Conduct Authority in December fined Santander £108mn, one of its largest penalties for anti-money laundering processes, for failings between 2012 and 2017.
Santander said it had invested more than £700mn over the past five years in a programme to transform its financial crime systems.
“We need to keep pace with technological change, which involves piloting new platforms and processes to ensure we are complying with best practice and continuing to innovate,” it added.
EY declined to comment.