Barclays attracts another mega-fine: £72 million for lack of client due diligence


Just a week after Barclays PLC (LON:BARC) agreed to pay $150 million in an FX settlement with New York State Department of Financial Services (DFS), the bank attracts another mega-fine…

The Financial Conduct Authority (FCA) today announced the imposition of a £72 million ($108.8 million) fine on Barclays Bank over failures to minimise the risk that it may be used to facilitate financial crime.

The failings are associated with a £1.88 billion 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 (PEPs) and should hence have been subject to enhanced levels of due diligence and monitoring by the bank.

The FCA notes that it makes no finding that the transaction in question, in fact, involved financial crime. However, the circumstances of the transaction gave rise to a number of features which, together with the PEP 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 the bank 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.

FCA_logoBarclays did not follow its standard procedures and instead took on the clients as quickly as possible and thereby generated £52.3 million in revenue. The bank did not obtain information that it was required to obtain from the clients to comply with financial crime requirements.

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.

The fine includes:

  • disgorgement of £52.3 million, equal to the amount of revenue that Barclays generated from the Transaction;
  • 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.”

Due to the fact that Barclays agreed to settle at an early stage of the FCA’s investigation, it qualified for a 30% discount. Were it not for the 30% discount the financial penalty would have been £80,542,000.

To view the official announcement from the FCA on the action taken against Barclays, click here.

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Barclays attracts another mega-fine: £72 million for lack of client due diligence

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