Compliance Updater - December 2021
A summary of key compliance stories around the globe in December.
- Listing rules changes take effect in the UK.
- Dubai DFSA fines manager of REIT over “misleading statements”.
- FCA launches second consultation on consumer duty.
- Deutsche Bank fined €8.7m by BaFin for rate-rigging prevention control failings.
- EU fines four banks for forex rigging.
- Bin bags full of cash accepted by NatWest.
- Transparency International raises concerns over electronic money institutions.
- UK’s FCA fines BlueCrest Capital £40m for conflict failings.
- FCA fines GAM £9.1m and ex-fund manager £230k over conflicts.
- Goldman Sachs Asset Management to vote against non-diverse boards.
- HSBC fined £64m for money laundering failings.
- Two fines for incorrect reporting to PRA.
Listing rules changes take effect in the UK.
Reforms to the listing rules in the UK came into force aiming to make London a more appealing listing venue. The reforms will allow companies to offer as little as ten per cent of the company’s shares in a listing, down from twenty-five per cent. The founders of a company will also be allowed a dual-class share structure to list on the “premium” part of the market. Other changes include an increase in the minimum market value from £700,000 to £30m for the main market in London. Companies worth less than £30m will need to choose platforms for growth stocks, such as Aim.
Dubai DFSA fines manager of REIT over “misleading statements”.
The manager of Emirates REIT – a listed real estate company in Dubai, UAE – was fined $210,000 for making “misleading statements”. The manager, Equitativa, failed to provide against $2m of rent from a school and presented the same property as having secured a new tenant when there was no binding commitment. The issues related to the half-year 2018 accounts and were reflected appropriately in the annual audited financial statements for the year.
FCA launches second consultation on consumer duty.
The UK’s Financial Conduct Authority (FCA) released a second consultation paper proposing to set a higher standard of consumer protection in retail financial markets. It will, “focus on supporting and empowering customers to make good financial decisions” by expecting firms to put themselves in the customer’s shoes and ask themselves, “would I be happy to be treated in the way my firm treats its customers?”. The consultation closes in mid-Feb 2022.
Deutsche Bank fined €8.7m by BaFin for rate-rigging prevention control failings.
The German regulator BaFin fined Deutsche Bank €8.7m for failing to implement measures designed to prevent rate-rigging. BaFin said Deutsche Bank did not always have “effective preventive systems, controls and policies” to ensure the “integrity and reliability” of data relating to Euribor.
EU fines four banks for forex rigging.
The EU’s antitrust regulator fined HSBC, Credit Suisse, Barclays and RBS a total of €344m for colluding to rig the foreign exchange market. Concluding a long-running investigation, the EU competition commissioner said the collusive behaviour, often on chat rooms, “undermined the integrity of the financial sector at the expense of the European economy and consumers”.
Bin bags full of cash accepted by NatWest.
NatWest was fined £264.7m after pleading guilty to failing to prevent money laundering. The failures related to Fowler Oldfield, a Yorkshire gold dealer that became a NatWest customer in 2011. £365m was deposited in the NatWest accounts of Fowler Oldfield over a five-year period, including £264m in cash. The cash was paid into fifty branches, at one point at a rate of £1.8m a day and included a £700,000 deposit delivered in black bin liners. NatWest did raise a suspicious activity report (SAR) about a Fowler Oldfield customer who received £387,000 from the gold dealer, but no SAR was raised about the gold dealer itself.
Transparency International raises concerns over electronic money institutions.
Transparency International UK warned that electronic money institutions could become a “major gateway” for illicit funds around the world. It reviewed two-hundred and sixty-one electronic money institutions licensed in the UK and found one hundred with potential money laundering red flags. The red flags included owners or directors identified in money laundering investigations, or senior staff or directors previously employed at institutions alleged or proved to have money laundering failings.
UK’s FCA fines BlueCrest Capital £40m for conflict failings.
The UK’s FCA fined former hedge fund BlueCrest Capital Management UK £40m for failing to manage a conflict of interest relating to its external investors. The issue covered the period between October 2011 and December 2015 as BlueCrest moved towards conversion into a family office. It appears that the external investors’ funds were managed using an algorithm designed to replicate the trades made by traders working on the internal fund, and the algorithm did not perform in the same way and, at times, underperformed.
FCA fines GAM £9.1m and ex-fund manager £230k over conflicts.
The UK’s FCA fined asset manager GAM £9.1m for failing to manage conflicts of interest, and former star fund manager Tim Haywood £230k for the same and for breaching GAM’s gift and entertainment policy. The issue related to Haywood’s purchases of bonds for GAM’s Absolute Return Bond Fund issued by companies within Sanjeev Gupta’s control and his relationship with supply chain finance group Greensill Capital. Mr Haywood had flown on Greensill’s private jet on a number of occasions, including a flight to the Mediterranean with his wife. The FCA fined GAM for “failing to conduct its business with due care, skill and diligence” and not having systems in place to prevent conflicts of interest.
Goldman Sachs Asset Management to vote against non-diverse boards.
Goldman Sachs Asset Management, which manages more than $2tn of assets, will from March 2022 require companies globally to have at least two women on any board with more than ten directors. For S&P 500 and FTSE 100 companies, it will also require at least one director to be from an under-represented minority group.
HSBC fined £64m for money laundering failings.
The UK’s FCA fined HSBC £64m for “serious weaknesses” in anti-money laundering controls over eight years between March 2010 and March 2018. This included a failure to properly consider and pick up the risk of suspicious activity and not testing and updating its systems. One example was an HSBC account set up with an expected annual income of £40,000 – the bank failed to act when hundreds of thousands of pounds in additional income was added, including £120k in a single day. The fine was reduced by thirty per cent from £91m for early settlement.
Two fines for incorrect reporting to PRA.
Two banks – Standard Chartered (StanChart) and Metro Bank were fined by the UK’s Prudential Regulation Authority (PRA) for reporting failings. Standard Chartered was fined £46.5m for inaccurately reporting its liquidity position from March 2018 to May 2019. StanChart made five errors in its regulatory reporting over the period and only told the regulator about one of the mistakes after a four-month internal review. The PRA said StanChart had not been “open and co-operative” and failed to notify “promptly” of material issues. Metro Bank was fined £5.4m for “failing to act with due skill, care and diligence” in its capital position reporting and for related governance and controls weaknesses. Metro had failed to apply the correct risk weightings to some commercial loans between 2016 and 2019, revealing a £900m adjustment to correct the issue in January 2019.
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