Barclays fined for noncompliance
BARCLAYS has been fined £72m for cutting corners in checking wealthy customers involved in a huge transaction described by a senior manager as potentially the “deal of the century”.
BRITAIN’s financial watchdog has fined Barclays £72m for cutting corners in checking wealthy customers involved in a huge transaction described by one senior manager as potentially the “deal of the century”.
Barclays arranged the £1.9bn transaction in 2011 and 2012 for a number of rich clients deemed by the regulator to be politically exposed persons, or people holding prominent positions that could be open to financial abuse.
That should require a bank to conduct more detailed checks on them, but Barclays failed to do so and cut corners with its compliance procedures, Britain’s Financial Conduct Authority (FCA) said in a damning report yesterday.
“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 FCA said.
Barclays, which received a 30% discount on the fine for settling at an early stage in the investigation, said the FCA made no finding that the bank had facilitated any financial crime in relation to the transaction or the clients on whose behalf it was executed.
“Barclays has co-operated fully with the FCA throughout and continues to apply significant resources and training to ensure compliance with all legal and regulatory requirements,” it said.
Just more than £52m of the penalty on the bank comprised disgorgement, meaning clawing back the profit Barclays made on the transaction. That is the largest disgorgement penalty yet imposed by the FCA.
The watchdog declined to name the clients or many details of the transaction, which was known by those involved within Barclays as an “elephant deal” because of its size. Indeed, the FCA said Barclays kept details of the clients and transaction off its computer system, and had agreed that if their names were ever revealed it would have had to pay them £37.7m.
“Barclays restricted the number of its staff who were involved in the business relationship and sought to address the financial crime risks that were associated with it in an ad hoc way,” the FCA said in a 37-page notice on the bank’s failings.
It said Barclays’ senior management was concerned about completing the due diligence for the deal quickly, with one manager quoted as saying he wanted to “race this through.”
Bob Diamond was Barclays CEO from the start of 2011 until he left in July 2012. The head of wealth management in 2011 and 2012, which oversees dealings with rich clients, was Tom Kalaris. He stepped down in May 2013.
A spokesman for Mr Diamond declined to comment, while Mr Kalaris could not immediately be reached for comment.
The deal was the largest Barclays had yet executed for wealthy clients.
The bank had also failed to establish adequately the purpose and nature of the deal and had not corroborated the clients’ stated source of wealth and source of funds for the transaction sufficiently, the FCA said.