FCA has fined Barclays Bank (Barclays) £72,069,400 for failing to minimise the risk of being used to facilitate financial crime. Barclays arranged and executed a £1.9 billion transaction which involved several ultra high net worth politically exposed persons (PEPs) who were the beneficiaries of a trust in which proceeds of investments were held. The customers and the transaction should have been subject to enhanced levels of monitoring and due diligence by the bank. FCA stressed that it had found no evidence of financial crime, but said the circumstances of the transaction indicated a higher level of risk and yet Barclays applied a lower level of due diligence than its policies required. Barclays agreed to keep details of the transaction strictly confidential and agreed to indemnify the clients up to £37.7 million in the event that it failed to comply with these confidentiality restrictions. As a result, Barclays decided its normal procedures for dealing with PEPs were not appropriate for the relationship and restricted the numbers of staff involved in it. FCA found Barclays had breached Principle 2 by failing to conduct its business with due skill, care and diligence. Specifically:

  • front office senior management did not properly oversee handling of the risks. It was unclear who had responsibility and those who approved the relationship understood neither the risks involved nor the purpose of their approval;
  • despite having classified the clients as “sensitive PEPs”, the bank did not respond to several features of the relationship that indicated higher risks of financial crime;
  • it did not follow its standard procedures, and in fact followed a less robust process than it would normally have done with lower risk business. For example, it did not ask clients for information so as not to inconvenience them;
  • there were insufficient checks on the purpose of the relationship and source of funds. The bank did not ask questions when funds received were not identified as respected, and did not query instances where its requests for information were refused;
  • it did not monitor risks on an ongoing basis; and
  • it failed to keep adequate records of the due diligence it carried out.

The fine comprises the whole of Barclays’ revenue from the transaction as well as a penalty of £28,242,000 (discounted by 30% for early settlement) and is the largest fine imposed by FCA for financial crime failings. (Source: FCA Fines Barclays £72 million for Poor Handling of Financial Crime Risks)