Barclays Bank has been fined £72 million (€102 million) after it failed to take measures to minimise risk of financial crime surrounding a large transaction for ultra wealthy clients. A reason for the failing was because Barclays “did not wish to inconvenience” the clients.
The fine is the largest that the Financial Conduct Authority (FCA) has issued for this type of failing. The regulator’s effort to combat financial crime is seen as vital for protecting the integrity of financial services and its prevention activities cover asset management.
The FCA says no financial crime in the Barclays case was found and that it is not criticising the ultra high-net-worth clients involved in the transaction.
However, staff involved in the transaction, the largest of its kind for Barclays and earning the bank £52.3 million of revenue, did not sufficiently corroborate the source of client funds or establish the purpose of the transaction. The transaction was kept highly secret, even internally.
Barclays arranged and executed the £1.88 billion transaction, which involved investments in financial instruments, in 2011 and 2012 for a number of ultra wealthy clients. The clients were ‘political exposed persons’ and should have been subject to enhanced levels of due diligence and monitoring by the bank.
Yet Barclays applied a lower level of due diligence than its policies required for other business relationships of a lower risk profile.
Barclays did not follow its standard procedures because it wanted to take on the clients as quickly as possible and generate the £52.3 million in revenue, the FCA says.
Barclays went to unacceptable lengths to accommodate the clients, the regulater adds, saying the bank did not obtain necessary information from the clients because it “did not wish to inconvenience” them.
Barclays agreed to keep details of the transaction strictly confidential, even within the firm, and agreed to indemnify the clients up to £37.7 million if information leaked out.
The FCA says few people knew of the existence and location of the firm’s due diligence records, which were kept in hard copy and not on Barclays’ systems. This had a detrimental impact on how the business relationship was monitored by Barclays and also meant that Barclays could not respond promptly to the FCA’s information request.
The full figure of the fine is £72,069,400 and it covers the revenue Barclays earned and includes a penalty of £19,769,400.
In a statement, Barclays says it “continues to apply significant resources and training to ensure compliance with all legal and regulatory requirements”.
The FCA’s Mark Steward, director of enforcement and market oversight, says: “Barclays ignored its own process designed to safeguard against the risk of financial crime and overlooked obvious red flags to win new business and generate significant revenue. This is wholly unacceptable.”
The FCA makes no finding that financial crime was involved or facilitated by Barclays, or regarding the provenance of the funds invested as part of the transaction. Nor does the FCA find that revenue that Barclays generated from the transaction was derived from any financial crime.
In 2013 the FCA published a thematic review
of financial crime controls, covering money laundering and corruption, in asset management firms and platforms.
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