London - Barclays bankers who manage money for the ultra-rich were supposed to have been even more vigilant than usual as they considered a multi-billion-dollar deal for people with high-profile political ties in 2011.
Instead, officials at the London-based lender “relied on printouts from publicly available internet pages” while failing to seek out the source of the clients’ wealth, as required under anti-money laundering rules, the UK Financial Conduct Authority said as it imposed a fine on Barclays. As they worked to close the 1.9 billion-pound ($2.9 billion) “elephant deal”, the bankers kept details of the transaction in a safe.
That arrangement meant the bank was unable to respond “promptly” to a request for information regarding the clients, with only a few people aware of the “existence and location of the safe”, the FCA said. Barclays had to “conduct manual searches for other information” linked to the individuals, the FCA said.
The FCA fined Barclays a record 72.1 million pounds in the matter for failing to fully probe the group of “politically exposed” ultra-high-net-worth clients, a blow to Chairman John McFarlane’s pledge to restore a “high performance ethic” at the bank after a series of scandals. Earnings across the industry have been hurt by costs tied to past misconduct, ranging from the manipulation of currency benchmarks to tax evasion by clients.
The FCA made no finding the bank facilitated any financial crime in relation to the transaction.
Barclays should have imposed “enhanced levels of due diligence monitoring” as it executed the transaction, dubbed an elephant deal because of its size, the FCA said, without disclosing the names of the individuals involved. The lender didn’t follow standard procedures, “preferring instead to take on the clients as quickly as possible”, it said.
“While there is nothing inherently wrong with keeping documents in hard copy, they must be easily identifiable and retrievable,” the FCA said of the bankers’ decision to use the safe.
‘Deal of the century’
In the early stages of the transaction, which generated 52.3 million pounds in revenue, one executive said it could be “the deal of the century” for Barclays. The structured-finance transaction consisted of investments in notes backed by underlying warrants and third party bonds, the FCA said.
The clients requested that Barclays make a payment of several tens of millions of US dollars to a third party at one stage during the transaction. The request was withdrawn after Barclays questioned the reason for that payment, according to the FCA.
Barclays said on Thursday that it “co-operated fully with the FCA throughout and continues to apply significant resources and training to ensure compliance with all legal and regulatory requirements.”
BLOOMBERG