Financial Conduct Authority Fines Barclays £42 Million for Financial Crime Risk Management Failures

On July 16, the United Kingdom Financial Conduct Authority (FCA) fined Barclays Bank UK PLC and Barclays Bank PLC a total of £42 million for two separate instances of failings in its financial crime risk management.  In the first case, the FCA fined Barclays Bank UK PLC £3.09 million for its failure to check that it had gathered sufficient information to understand the money laundering risk, before opening a client money account for the now-defunct wealth management firm WealthTek.

In the FCA’s words, ‘One simple check it could have done was to look at the Financial Services Register before opening the account. Had it done so, it would have seen that WealthTek was not permitted by the FCA to hold client money.’ Previously, the FCA had separately charged WealthTek’s principal partner with multiple criminal offences, including money laundering and fraud.

In the second case, the FCA fined Barclays Bank PLC £39.3 million for its failure to adequately manage money laundering risks associated with providing banking services to a precious-metals firm now in liquidation, Stunt & Co.  After Barclays failed to gather enough information at the start of its relationship with Stunt & Co. or carry out proper ongoing monitoring, in just over a year, Stunt & Co received £46.8 million from Fowler Oldfield, a multimillion-pound money laundering operation.

The FCA stated that Barclays failed to properly consider the money laundering risks associated with Fowler Oldfield ‘even after receiving information from law enforcement about suspected money laundering through Fowler Oldfield, and after learning that the police had raided both firms.’  Not until after it learned of the FCA’s decision to prosecute another leading financial institution, NatWest, over its relationship with Fowler Oldfield did Barclays conduct a review of its exposure to Fowler Oldfield through its customers, including Stunt & Co.

These fines should constitute a potent reminder that under the Money Laundering Regulations, financial institutions need to maintain consistent vigilance in fulfilling their customer due diligence and monitoring obligations with regard to all categories of customers, whether individual or corporate.  In particular, as the FCA has made clear, Money Laundering Reporting Officers need to ensure that their firms are applying the appropriate level of due diligence to identify and manage the risks associated with all categories of individual customer relationships. 

Jonathan J. Rusch is Director of the US and International Anti-Corruption Law Program and Adjunct Professor at American University Washington College of Law, Adjunct Professor at Georgetown University Law Center, a practicing lawyer in Washington, D.C., and Principal of DTG Risk & Compliance LLC.