Barclays Fined for Anti-Money-Laundering Control Failings -- Update
November 26 2015 - 7:14AM
Dow Jones News
By Max Colchester and Giles Turner
LONDON-- Barclays PLC was on Thursday fined by British
regulators over anti-money-laundering control failings linked to a
secretive GBP1.88 billion ($2.83 billion) deal it arranged for a
number of rich clients.
The Financial Conduct Authority fined Barclays GBP72 million for
"failing to minimize risk" around a product it structured for
clients between in 2011 and 2012.
The deal in question, which the FCA said didn't involve any
financial crime, was never logged on a Barclays computer. It
included a clause that offered to pay the clients up to GBP37.7
million if their names were ever disclosed. Documents related to
the deals were locked in a specially bought safe that few staff
knew existed.
"Barclays applied a lower level of due diligence than its
policies required for other business relationships of a lower risk
profile," the FCA said. The FCA said the clients were politically
exposed persons and so should have been subject to higher levels of
due diligence.
Barclays said: "The FCA made no finding that Barclays
facilitated any financial crime in relation to the transaction or
the clients on whose behalf it was executed." The bank made GBP52.3
million on the transactions, known as an "elephant deals," which
are structured to pay returns to clients over several years.
The fine shines an uncomfortable spotlight on the bank's
dealings under former chief executive Bob Diamond. Under his watch
Barclays's structured capital markets team gained a reputation for
building highly profitable and complex financial products. The bank
also boasted close relationships with a number of high profile
Middle Eastern investors.
The U.K.'s Serious Fraud Office launched an investigation in
2012 into whether the bank breached disclosure obligations when
raising billions of pounds from investors that included Qatar
Holdings LLC in 2008.
Thursday's fine isn't linked to that probe, according to a
person familiar with the matter.
In its notice the FCA said 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
high-net-worth clients.
The Barclays compliance staff named in the bank's systems as
giving approval for the transaction had no idea they were named as
doing so, the FCA said. Barclays also relied on Internet research
to check the clients' sources of wealth.
While the FCA noted that there was nothing wrong in keeping a
hard copy of documents locked in a special safe, "few people in
Barclays" new where the safe was, or that it even existed.
"Barclays went to unacceptable lengths to accommodate the
clients," the notice said.
Ian Walker
contributed to this article.
Write to Ian Walker at ian.walker@wsj.com
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(END) Dow Jones Newswires
November 26, 2015 06:59 ET (11:59 GMT)
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