Last week, Barclays in the UK was fined £72,069,400 by the Financial Conduct Authority for “failing to minimise the risk that it may be used to facilitate financial crime” while processing a £1.88 billion “elephant deal” (i.e. stonking great deal) for “a number of ultra-high net worth clients [who] were politically exposed persons (PEPs) and should therefore have been subject to enhanced levels of due diligence and monitoring by Barclays”. As you may have guessed, this the bank did not do; in fact, “Barclays applied a lower level of due diligence than its policies required for other business relationships of a lower risk profile [and] did not follow its standard procedures, preferring instead to take on the clients as quickly as possible and thereby generated £52.3 million in revenue”. All rather disappointing, and I am sure we will all be reading the FCA Final Notice very closely.
However, what has given me pause for thought is the wording of it all. In days gone by, surely this would have been headlined as a failure of anti-money laundering procedures? Indeed, the Final Notice mentions money laundering and anti- several times. “It is the responsibility of UK financial institutions to ensure that they minimise the risk of being used for criminal purposes and, in particular, of facilitating money laundering or terrorist financing. Barclays failed to do so in connection with the Transaction.” “The extension of credit to clients who use their own assets as collateral poses a money laundering risk. In these circumstances, Barclays should have taken additional steps to satisfy itself that the origin and source of the funds for Transaction were legitimate.” So the failure was patently in the AML arena. And – most interesting of all – within the definitions section of the document, we have this: “’Financial crime risks’ means the risks of money laundering and terrorist financing”. So why not use those terms?
The FCA started talking more fulsomely about “financial crime risk” in December 2011, when it published its policy statement “Financial crime: a guide for firms”. But here the definition is much wider, which makes sense: “Financial crime is any crime involving money. More formally, the Financial Services and Markets Act 2000 defines financial crime ‘to include any offence involving (a) fraud or dishonesty; (b) misconduct in, or misuse of information relating to, a financial market; or (c) handling the proceeds of crime’. The use of the term ‘to include’ means financial crime can be interpreted widely to include, for example, corruption or funding terrorism.” I can understand the need for firms to be aware of all financial crime, and not just money laundering (although that is the most interesting by far and, as eny fule kno, Best Subject Ever) and terrorist financing. But I can’t understand why an AML failing – which this Barclays situation patently is – would not use that specific term, just as the public is starting to understand what it is and why it matters. MLROs unite, and reclaim AML!