Spanish financial giant Santander has received a refund from EY, after a project involving the firm’s financial crime team allegedly went wrong. Reports from sources at the firm suggest the problems occurred over “an extended period”.   

Santander is a multinational banking and financial services company, based in Madrid. Like many financial institutions, it has been struggling with a raft of regulatory changes since the Great Recession of 2008.

As the group sought to improve its compliance, it brought consultants from EY’s financial crime wing on board. However, the work the firm undertook, codenamed Project Morgan, is understood to have gone “badly wrong over an extended period”. As a result, Santander has terminated the engagement.

According to reports in the Financial Times, two people close to the story said that the work from EY was so bad that the firm was forced to offer Santander a refund of around £15 million for the project. 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 – and the financial settlement has subsequently dented the results of EY’s wider financial services wing, according to sources.

The news follows the UK’s Financial Conduct Authority fining Santander £108 million in December 2022. The fine was one of its largest penalties for anti-money laundering processes ever, and pertained to failings between 2012 and 2017. Santander admitted to having it had invested more than £700 million over the past five years in a programme to transform its financial crime systems – though it has not confirmed that this was the project EY was working on.

It is not clear whether the work relating to Project Morgan has been brought in-house by Santander or handed to another firm. Meanwhile, according to sources quoted by the Financial times, EY is still working for Santander on other matters around the world.

This latest set-back comes at a difficult time for EY, after the collapse of its ill-fated project to split the firm earlier in 2023. Amid the chaos of that, and the slowdown endured by the broader consulting market, EY is understood to be cutting back on its UK financial wing. Dozens of members of the 150-person financial crime division are part of that, and the failure of the Santander project has contributed to the likelihood of redundancies in the team, according to two sources familiar with the matter.