The Financial Conduct Authority, whacking the bank with a £72m penalty for failing to run checks on a group of “politically exposed persons” wishing to transfer £1.88bn in a hurry, tells a cracking tale.
See the bankers salivate as they eye the rewards that will come with this “elephant deal”. One manager wants to “race this through”. One thinks they could be on to “the deal of the century”.
When the client demands strict confidentiality, on pain of £37.7m in compensation if names leak, the Barclays managers deem electronic record keeping to be too risky and buy a physical safe to store hard copies. “Few people in Barclays knew of the existence and location of the safe,” says the report.
None of those entertaining details directly worry the FCA. The regulatory breach lay in failing to check properly how the clients got their fortune in the first place. Barclays didn’t follow its own rules even though there were “a number of features of the business relationship that indicated a higher risk of financial crime”.
Some of the bank’s attempts at due diligence were almost comical.
One explanation of the clients’ wealth said it came from “landholdings, real estate and business and commercial activities”.
As the FCA notes drily, “this was wholly inadequate and virtually meaningless in the context of the due diligence that Barclays was required to undertake”.
Overall, Barclays “failed to minimise the risk that it may be used to facilitate financial crime”.
The only feature missing from the FCA reports is names.
We don’t know which Middle Eastern ruler (that is the City’s best guess: the Arab spring was happening at the time) was willing to pay Barclays £52.3m to transfer £1.88bn in a complex deal involving “multiple jurisdictions, offshore companies, a trust and several temporary bank accounts in different currency denominations”.
Nor, more importantly, do we know which individuals at Barclays were involved. The FCA, after a run-in with the courts, is obliged to remove job titles from its reports to prevent individuals being identified, or guessed at. Thus “senior management” is the stock phrase in this report. Nor is the FCA allowed to say whether it is investigating individuals with a view to imposing fines or bans from the City – but it would be astonishing if it isn’t.
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