Financial services investigations and enforcement monthly round up - June 2019

A round-up of recent enforcement actions and investigations in the financial services sector.

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Law Commission recommends more AML guidance

  • The Law Commission has called for more guidance to help improve anti-money laundering (AML) in the UK, after identifying weaknesses in the current Suspicious Activity Report (SARs) regime.
  • It is believed that AML costs the UK economy billions of pounds each year. The number of SARs processed between April 2017 and March 2018 increased by nearly 10% to 460,000 compared to the previous year. However, this does not indicate that organisations are more aware of AML issues, according to the Law Commission.
  • The Law Commission found huge inconsistencies in reporting, misunderstanding of legal obligations and overly cautions SARs applications being submitted. A high number of low quality SARs meant that they took too much time to process, and contained limited information.
  • In response, the Law Commission have recommended creating an advisory board to ensure the current regime is effective in tackling AML issues. They suggest the board should comprise of public and private sector experts to advise the Secretary of State on any appropriate improvements. They also recommend a new online SAR form to make reporting easier.

Does the FCA's whistleblowing policy need further clarity?

  • The FCA has confirmed that it will review its whistleblowing guidance following a recommendation made by the Complaints Commissioner.
  • The Complaints Commissioner recommended the FCA reviews the whistleblowing guidance on its website, and should have a clearer definition of a whistle blower.
  • The issues regarding the FCA's current guidance were identified after an overseas financial adviser tried to alert the regulator about a company, which has since been declared in default. Current guidance on the FCA's website states that "If you think a firm or individual is involved in wrongdoing within an area we regulate, and you want to report it confidentially, contact our whistle blowing team".
  • When the adviser attempted to report his concerns to the FCA, he was told that it was nothing to do with whistle blowing and was referred to the FCA's customer contact centre. The adviser was informed that whistle blowing only applied to employees or former employees of an authorised firm, and as such he did not qualify.
  • The Complaints Commissioner was concerned that this advice did not accord with the FCA's guidance on its website. The FCA has since reported that it will take the recommendation into consideration.

FCA publishes Decision Notices, imposing fines of over £665,000 for a listed company

  • On 3 June 2019, the FCA published Decision Notices against Cathay International Holdings Limited (Cathay) and two of its directors, Mr Jin-Yi Lee and Mr Eric Siu. The FCA imposed a fine of £411,000 on Cathay, stating it breached the FCA's Listing Principles and DTR.
  • In 2015, Cathay's financial performance deteriorated. In the FCA's view, there were serious failings in the company which meant they did not monitor the full impact on these issues on its expected financial performance. The company failed to disclose relevant information to the market which it was required to do under Listing Principles.
  • The FCA considers Mr Lee was knowingly concerned in the breaches, and imposed a fine of £214,300. The FCA found that Mr Siu was knowingly concerned in one of the company's breaches and so has been fined £40,200.
  • Cathay, Mr Lee and Mr Sui still have the right to refer their Notices to the Upper Tribunal where the Upper Tribunal will determine what, if any, the appropriate action is for the FCA.

FCA tells Allied Wallet to cease trading

  • The FCA has told Allied Wallet, an e-money issuer to stop providing payment services. This comes after federal authorities in the US accused the company of facilitating fraudulent transactions worth millions of dollars.
  • According to the FCA register, the company must not carry out any regulated activity, must safeguard all relevant funds and has to provide daily notifications to the authority.
  • The decision follows a settlement between the US Federal Trade Commission and three of the company's senior executives in May 2019.
  • It is unclear whether the FCA has carried out its own investigation or whether they have taken this action directly from the US case.

Switzerland's competition watchdog imposes fines totalling £71.3 million

  • The competition authority in Switzerland, WEKO have fined five banks, including RBS and Barclays for fixing foreign exchange trading. This comes weeks after the European Commission imposed a significant fine of £950 million on the same five banks which include Citigroup, JPMorgan Chase and MUFG Bank.
  • WEKO said that it had found "several anti-competitive arrangements between banks in foreign exchange spot trading". Traders from the banks participated in the so called 'Three way banana split' cartel from 2007 to 2013, where they communicated in on-line chat rooms.
  • UBS was part of the cartel but was not fined as it revealed the extent of the operation to the competition authorities.
  • The British banks have been ordered to pay more than half of the overall fine. Barclays was fined £21.5 million and RBS has been ordered to pay £17.8 million.
  • The FCA carried out its own investigation into the same scandal focusing on regulation breaches, handing out fines of £1.3 billion in 2014.

Company sentenced for £16 million Angolan bribery scheme

  • On 3 June 2019, FH Bertling Ltd was fined £850,000 for a bribery scheme created to secure a ConocoPhilips freight forwarding contract, worth over £16 million for an oil exploration project in the North Sea.
  • The four year investigation and prosecution by the SFO focused on the company's involvement in an oil project in Angola. The SFO charged the company and several executives with making corrupt payments to a local state oil company official, to secure shipping contracts.
  • The company paid bribes amounting to $350,000, resulting in seven convictions against the company and its employees.
  • The company's UK operations were closed following the SFO investigation, and are currently in liquidation.

This publication is intended for general guidance and represents our understanding of the relevant law and practice as at June 2019. Specific advice should be sought for specific cases. For more information see our terms and conditions.


Date published

26 June 2019


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