Release Date: 26th November 2015
To access the original FCA document, click here.
Summary
The Financial Conduct Authority (FCA) has fined Barclays Bank £72,069,400 for failing to adequately manage financial crime risks related to a £1.88 billion transaction involving politically exposed persons (PEPs) in 2011 and 2012. Despite the high risk associated with the clients’ PEP status, Barclays did not follow its enhanced due diligence procedures, choosing instead to expedite the transaction to generate £52.3 million in revenue.
Key Failures:
- Due Diligence: Barclays applied lower due diligence levels than required, bypassing its standard procedures.
- Confidentiality: The bank agreed to confidentiality terms that restricted internal awareness and access to due diligence records, impeding monitoring and regulatory response.
- Senior Management Oversight: There was inadequate oversight from senior management regarding financial crime risks.
- Transaction Monitoring: Barclays failed to establish the transaction’s purpose, corroborate the clients’ source of wealth and funds, and conduct ongoing risk monitoring.
Barclays’ failings were seen as serious due to the potential risk of financial crime, though the FCA made no finding that the transaction facilitated such crime. The fine includes the disgorgement of the £52.3 million revenue and an additional penalty of £19,769,400.
Key Takeaways for Firms:
- Enhanced Due Diligence: Ensure that enhanced due diligence is rigorously applied, especially with high-risk clients like PEPs.
- Robust Monitoring: Maintain comprehensive and accessible records of due diligence to facilitate proper monitoring and regulatory compliance.
- Senior Management Accountability: Clearly define and enforce senior management responsibilities for overseeing financial crime risks.
- Follow Standard Procedures: Adhere strictly to established procedures and do not compromise on due diligence for the sake of business expediency.
- Transparency and Internal Controls: Avoid confidentiality agreements that limit internal visibility and control over high-risk transactions.
By addressing these areas, firms can better protect themselves from regulatory penalties and uphold the integrity of their operations against financial crime risks.
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