Thu, May 6, 2021

FCA Fines Firm for Serious Financial Crime-Control Failings in Relation to Cum/Ex Trading

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The FCA has fined a firm £178,000 in the first FCA case in relation to cum/ex trading, dividend arbitrage and withholding tax (WHT) reclaim schemes. Between February 2015 and November 2015, the firm failed to have in place adequate systems and controls to identify and mitigate the risk of facilitating fraudulent trading and money laundering.

The firm’s lack of “due skill, care and diligence” in applying and monitoring its anti-money laundering (AML) and financial crime policies resulted in the firm executing purported over-the-counter (OTC) equity trades to the value of around £2.5 billion in Danish equities and £3.8 billion in Belgian equities for another firm who was attempting to withhold tax reclaims in Denmark and Belgium.

Mark Steward, director of enforcement and market oversight, stated that “the FCA expects firms to have systems and controls that test the purpose and legitimacy of transactions, reflecting skepticism and alertness to the risk of money laundering and financial crime, and failures here constitute serious misconduct”.

The FCA discounted the original fine of £236,740 by 30% and further reduced it from £219,000 to £178,000, due to the serious financial hardship that would be caused to the firm by the imposition of the penalty.

To read the final notice issued by the FCA in full, please click here.

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