Compliance Updater - October 2022
A summary of key compliance stories from around the globe in October.
- AJ Bell chair quits over FCA corporate governance decision.
- Kim Kardashian to pay $1.26m to settle crypto charges.
- KPMG fined in Dubai over Abraaj audit.
- Leonteq and EY conclude that trades were not suspicious.
- Barclays challenges FCA’s £50m fine over Qatar fundraising.
- Credit Suisse reaches two settlements - $495m over RMBS and €238m over money laundering.
- UK FCA looking at Big Tech moves into payments.
- Crackdown on funds’ greenwashing.
AJ Bell chair quits over FCA corporate governance decision.
Dame Helena Morrisey, the chair of UK fund platform AJ Bell, resigned her position over a Financial Conduct Authority (FCA) decision to disallow the previous CEO to move to become a non-exec and deputy chair. Andy Bell, founder and significant shareholder, had been CEO for twenty-seven years and the FCA raised conflict of interest concerns over his plans to move to a non-exec role. He will now act in a consultancy capacity instead. The FCA decision has prompted the chair to step down once a suitable replacement is found.
Kim Kardashian to pay $1.26m to settle crypto charges.
Reality TV celebrity Kim Kardashian agreed with the US Securities and Exchange Commission to pay $1.26m to settle charges over the endorsement of crypto assets. Kardashian promoted EthereumMax tokens to her two-hundred million Instagram followers without revealing she was paid $250,000 to do so.
KPMG fined in Dubai over Abraaj audit.
The Dubai Financial Services Authority fined KPMG $1.5m and its former principal $500,000 for failing to meet international standards in the audits of collapsed private equity group Abraaj. The fines related to the periods up to October 2017, and Abraaj collapsed in 2018.
Leonteq and EY conclude that trades were not suspicious.
Whistleblowers have accused EY of whitewashing suspicious trades at a longstanding client. The client is Leonteq, a listed French fintech that designs and creates investment products including structured products. It appears that Leonteq created two structured products for a substantial co-operative and the fee of €120,000 was paid to a British Virgin Islands based company rather than the Paris brokerage that arranged the sale. An argument developed within Leonteq’s compliance department about whether the trades needed reporting to Tracfin, the French financial intelligence unit. Leonteq reached the conclusion that reporting was not necessary, and this was endorsed by EY.
Barclays challenges FCA’s £50m fine over Qatar fundraising.
Barclays is challenging the £50m FCA fine for the alleged failure to properly disclose £322m in fees paid in Qatar as the bank raised cash to prevent a government bailout in the financial crisis of 2008. The matter has been referred to the upper tribunal for reconsideration.
Credit Suisse reaches two settlements - $495m over RMBS and €238m over money laundering.
Credit Suisse agreed a $495m settlement with the New Jersey attorney-general over its sales of residential mortgage-backed securities dating back to before the financial crisis of 2008. The settlement had been fully provisioned by the bank and part of its ongoing efforts to resolve litigation issues.
Hot on the heels of the RMBS settlement, the bank agreed to settle French accusations of encouraging wealthy French clients to set up bank accounts in Switzerland beyond the reach of the French tax authorities. The accusations date back to the period between 2005 and 2012. The €238m settlement involved no admission of guilt and was made up of a €123m penalty and €115m in damages and interest payments.
Credit Suisse still has another five remaining RMBS cases outstanding as well as being on trial in New York over forex manipulation and in Singapore over links with Georgia’s former prime minister Bidzina Ivanishvili.
UK FCA looking at Big Tech moves into payments.
The FCA is launching an inquiry into moves by Apple, Amazon, Google, and Meta into retail financial services. All four tech giants hold licences for payment processing in the UK and the FCA is trying to look ahead to an expanding presence. The FCA sees “competition risks arising from them rapidly gaining market share… and potential exploitation of market power… that could be harmful to competition and consumer outcomes”.
Crackdown on funds’ greenwashing.
The UK FCA proposed restrictions on the use of the terms “green” and “ESG” in fund marketing alongside three fund labels that distinguish between green investment strategies. The three are for those that currently hold exclusively sustainable assets, those that encourage their holdings to become more sustainable, and those that are focused on having a positive real-world impact. The US is making similar moves as the SEC proposes closer and more detailed monitoring of its “naming rules”.
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