Friday, November 27, 2015

Barclays Bank Money Laundering Breaches – The Financial Conduct Authority is as much a problem as a solution!

The Financial Conduct Authority says that Barclays bank ‘cut corners’ on financial crime checks and did not properly monitor a £1.9bn transaction carried out on behalf "politically exposed" ultra-rich clients.

Well, in the Alice in Wonderland World inhabited by the ‘Financial Complacency Administration’, they may very well think that this is what happened, and by such a finding, they identify themselves as being part of the bigger problem in the perpetuation of the criminal sink which is the City of London, and proving that they are frankly ‘captured’ by the very bank they are required to supervise and regulate.

By adopting this view, they manage to underplay the seriousness of the conduct engaged in by this Organised Criminal bank, relegating its effects to being little more than a series of understandable oversights.

This is not the case.

Barclays conduct has been the most deliberate and egregious exhibition of criminal behaviour, undertaken to make vast profits which they would not otherwise have made, and done to both play up to the sensibilities of a bunch of Middle Eastern clients, and to confuse and mislead anyone who had any reason to question the transactions.

It is of interest to note that tje FCA go to great lengths to state that there was no evidence that the monies involved were the proceeds of crime, and Barclays associate themselves with that statement.

That is not the point.

To wilfully breach the Money Laundering Regulations 2007 in the way that Barclays have done in this case is to commit a whole series of criminal offences and Barclays should have been prosecuted for this deliberate and shameful conduct. But guess what, yet again, one of the world’s leading criminal banks has been allowed to walk away Scot free.

How does this happen?

I mean it’s not as if the Money Laundering Reporting Officers and Compliance Officers in Barclays didn’t know the laws and the regulations pertaining to these matters.

The law on these issues is quite clear and unequivocal.

Failure to comply with the various legal obligations and responsibilities placed upon an individual and a business by the Money Laundering Regulations 2007 is enforced by a tough regime of penalties, well tough on paper!. These measures apply to all businesses caught by the regulations. Senior Managers and all relevant employees MUST be trained in the legal and regulatory responsibilities for money laundering and terrorist financing controls and measures. There is therefore an obligation on employees to comply with the regulations. 

It follows that businesses can leave themselves exposed to punitive measures by the actions of employees.

Under Money Laundering Regulations 2007 (MLR 2007) regulation 47 places obligations upon officers of a Company and Partners.. Any officer in a Company who consents to or is involved in committing offences under the Regulations, or where any such offence is due to any neglect on his part, they will be INDIVIDUALLY liable to prosecution for the offence as well as the body corporate. Failure of senior managers to comply with the MLR 2007 obligations may result in financial penalties or a prison term of up to two years and/or an unlimited fine. 

Barclays has been fined £72m for failing to properly carry out anti-money laundering and financial crime checks on a major transaction in 2012 on behalf of ultra rich clients. 

The supine Financial Conduct Authority said the bank did not carry out the appropriate customer due diligence checks to establish the purpose of the £1.88bn transaction, or to sufficiently corroborate the source of the funds from the clients who were said to be prominent people in public life. 

Regulation 5 of the Money Laundering Regulations 2007 states;

Customer due diligence measures” means—

(a) identifying the customer and verifying the customer’s identity on the basis of documents, data or information obtained from a reliable and independent source;

(b )identifying, where there is a beneficial owner who is not the customer, the beneficial owner and taking adequate measures, on a risk-sensitive basis, to verify his identity so that the relevant person is satisfied that he knows who the beneficial owner is, including, in the case of a legal person, trust or similar legal arrangement, measures to understand the ownership and control structure of the person, trust or arrangement;

and (c) obtaining information on the purpose and intended nature of the business relationship.

In fact, Barclays applied a lower level of oversight than required for other business relationships of a much lower risk profile. 

The FCA said that the bank went to "unacceptable lengths" to accommodate the clients and did so because it "did not wish to inconvenience the clients". 

"Barclays agreed to keep details of the transaction strictly confidential, even within the firm, and agreed to indemnify the clients up to £37.7m in the event that it failed to comply with these confidentiality restrictions," the FCA said. 

This is the largest fine ever imposed by the FCA for failures to comply with anti-financial crime rules . 

In this case, the FCA said Barclays' clients were classed as politically exposed persons (PEPs) who should have been treated as higher-risk clients. So yet again, another series of regulations was ignored.

Instead, Barclays carried out even less oversight than it would have on much lower risk business. 

The regulator said that Barclays “...did not follow its standard procedures, preferring instead to take on the clients as quickly as possible and thereby generated £52.3m in revenue..."
Barclays wilfully ignored the regulations regarding the taking on of customers in order to facilitate the needs of some wealthy clients.
The billion-pound transaction was cloaked in secrecy with unusually tight confidentiality clauses, meaning few within the bank knew of its existence, or where to find the due diligence records, which were kept only in hard copy and not in the bank's IT systems.
Again, this was a breach of the record-keeping regulations.

The fine includes the £52.3m revenue that Barclay's made on the deal, plus an additional charge of £19.8m. The top-up was reduced by 30pc as the bank agreed to settle the case quickly. 

“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," said FCA enforcement boss Mark Steward. 

“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.”
What makes matters worse is that today, 27th November 2015, I rang the FCA Press Office and asked why no prosecutions had been brought against Barclays for these wilful breaches of the Money Laundering Regulations.

I was told that no criminal offences had been identified. I pointed out the criminal breaches of the regulations. The beardless juvenile who was answering my questions also said that only civil regulatory breaches had been identified. When I pointed out that breaches of the regulations carried 2 years imprisonment, the boy on the other end of the phone seemed unaware of that fact. He then said that the FCA couldn’t prosecute for such offences anyway.

Finding that I was getting no sensible response from this representative of the Fantastically Cretinous Apathy, and rapidly losing the will to live, I rang off. If this is the standard of intelligence and knowledge inside the FCA, no wonder we are so badly served in our dealings with the crooks in the Square Mile. Wasn’t it Schiller who said; ‘Against stupidity, the very gods themselves rail in vain’!

Barclays bank went out of their way to deliberately and wilfully ignore every regulation designed to provide a first line of defence against dealing with the possible proceeds of financial crime. They ignored the law, tried to cover up the conduct, and went out of their way to behave as dishonestly as possible.

For these offences, their shareholders have lost £52.3 million.

Is it any wonder that we have one of the most criminally inclined commercial markets in the world. We have regulators who are not worth a spit, who adamantly refuse to make big examples of these criminal enterprises when they have the opportunity.

Is it because they haven’t got the bottle for the fight, or has the Treasury told them to soft-pedal on the banks right now.

I know where my money is being placed!


Cedric said...

You've hit the nail on the head again Bos. Its only providence that this money wasn't the proceeds of crime because Barclays certainly didn't do anything to ascertain the source of the funds. Perhaps they asked the mysterious Middle Eastern client(s) if it was from a criminal source and received assurance it wasn't. OK thats fine then.......

In my previous LEA career when asking bankers why they hadn't questioned the source of funds I used to receive answers along the lines of "well, the client would have gone elsewhere....". Greed and stupidity prevail.

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