U.K. regulators fined Barclays Plc $109 million (72.1 million pounds) for risk failings in transactions executed by the bank in 2011 and 2012. Regulators found that Barclays bank failed to follow standard procedures aimed at minimizing the risk of money laundering by allowing the transactions to go through unchecked. The fine is the largest ever imposed by the Financial Conduct Authority for failings tied to financial crime.
The risk failings involved transactions worth 1.9 billion pounds conducted by a group of “politically exposed” ultra-high-net-worth clients. “Politically exposed” persons include individuals with prominent jobs, often associated with governments, which make them more susceptible for bribery or corruption. Family members or associates of such a person are usually also given the designation. According to the FCA, the individuals should have been “subject to enhanced levels of due diligence and monitoring.”
The potential issues with the transactions were discovered after the regulator made a request to the bank for a review of the transactions. The transactions involved investments in notes backed by underlying warrants and third-party bonds. Barclays bank finished its investigation into the transactions in November 2014.
The wealthy clients would receive a “specified rate of income” over a number of decades and Barclays bank would provide a “full capital guarantee” under the deal. Managers agreed to keep the transaction’s details and the identities of the clients confidential under the terms of having to pay them 37.7 million pounds in compensation if anything was revealed. The transaction was the largest of its kind for Barclays regarding individual clients.
At one point, the clients requested a payment worth several tens of millions of dollars to be made from Barclays bank to a third party, without explanation. When Barclays questioned the request, the clients withdrew it, again without explanation. The FCA said that while the payment could have been legitimate, the clients’ refusal to provide further information about the transaction indicated a higher risk of financial crime and should have triggered a higher level of scrutiny.
Barclays bank is one of the smaller global banks with wealth management divisions for the wealthy. As of 2014, the lender’s private bank had $130.5 billion of assets under management. Barclays has been having difficulty restoring investor confidence after numerous instances of past misconduct has surfaced. Costs tied to past misconduct are partially responsible for the bank recently cutting its profitability target for 2016. Barclays shares have fallen roughly 8 percent this year.
