FCA hands Barclays record fine

Sarah Davidson

November 26, 2015

The failings relate to a £1.88bn pound transaction that Barclays arranged and executed in 2011 and 2012 for a number of ultra-high-net-worth clients.

The clients involved were politically exposed persons and should therefore have been subject to enhanced levels of due diligence and monitoring by Barclays.

While the FCA makes no finding that the transaction involved financial crime, the circumstances gave rise to a number of features which, together with the status of the individuals, indicated a higher level of risk.

This required Barclays to adhere to a higher level of due skill, care and diligence but Barclays failed to do this.

In fact, 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, preferring instead to take on the clients as quickly as possible and thereby generated £52.3m in revenue.

The transaction involved investments in notes backed by underlying warrants and third party bonds. It was the largest of its kind that Barclays had executed for individuals.

Barclays went to unacceptable lengths to accommodate the clients. Specifically, Barclays did not obtain information that it was required to obtain from the clients to comply with financial crime requirements.

Barclays did not do so because it did not wish to inconvenience the clients. Barclays agreed to keep details of the transaction strictly confidential, even within the firm, and agreed to indemnify the clients up to £37.7m in the event that it failed to comply with these confidentiality restrictions.

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 request for this information.

The fine comprises disgorgement of £52.3m which is the amount of revenue that Barclays generated from the transaction, and a penalty of £19,769,400.

This is the largest fine that has been imposed by the FCA and its predecessor the FSA for financial crime failings.

Mark Steward, director of enforcement and market oversight at the FCA, said: “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.

“Firms will be held to account if they fail to minimise financial crime risks appropriately and for this reason the FCA has required Barclays to disgorge its revenue from the transaction.”

Barclays agreed to settle at an early stage of the FCA’s investigation and therefore qualified for a 30% discount.

This discount does not apply to the £52.3 million in revenue that Barclays generated from the Transaction which has been disgorged as part of the overall penalty.

Were it not for the 30% discount the financial penalty would have been £80,542,000.

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 make any finding that the revenue that Barclays generated from the transaction was derived from any financial crime. The FCA makes no criticisms of the clients.


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