Topic: Craig Whyte appears at court for failing to provide key passwords for seized devices
Subject of Enforcement: Craig Whyte
Date of Notice: 22/12/2021.
Overview: Craig Whyte appears at court for failing to provide key passwords for seized devices
In a prosecution brought by the Financial Conduct Authority (FCA), Craig Whyte has been charged with failing to provide passwords for various laptops and phones.
Mr Whyte appeared today at Manchester and Salford Magistrates’ Court, having been arrested at Manchester Airport at the request of the FCA by officers from Greater Manchester Police.
The arrest is in relation to non-disclosure of key passwords for various laptops and phones, which were seized from him by a warrant issued under s176 Financial Services & Markets Act 2000 on the 18 April 2018.
Mr Whyte was charged with failing to comply with a Statutory Notice issued under Section 49 Regulation of Investigatory Powers Act 2000 (RIPA 2000).
This is the first prosecution by the FCA in relation to this offence.
Mr Whyte has indicated a plea of not guilty and elected for trial in the Crown Court. Mr Whyte was granted conditional bail.
Topic: FCA publishes Decision Notice against hedge fund for conflicts of interest failings
Subject of Enforcement: BlueCrest Capital Management (UK) LLP
Date of Notice: 22/12/2021
Overview: FCA publishes Decision Notice against hedge fund for conflicts of interest failings
The Financial Conduct Authority has published a Decision Notice against BlueCrest Capital Management (UK) LLP (BCMUK) setting out its decision to impose a financial penalty of £40,806,700 on the firm.
BCMUK has elected to refer the case directly to the Upper Tribunal which will determine the appropriate action, if any, for the FCA to take.
The FCA considers that, between 1 October 2011 and 31 December 2015, BCMUK failed to manage fairly a conflict of interest created by allocating portfolio managers working on an external fund, open to investors outside BlueCrest, to an internal fund, open only to its partners and employees. The FCA found that BCMUK’s systems and controls did not manage the risk that portfolio managers could be allocated in a way that favoured investors in the internal fund over those of the external fund. This resulted in a sub-standard investment management service being provided to the external fund and its investors.
The findings in the Decision Notice are provisional and only reflect the FCA’s views at this stage since BCMUK has yet to make representations. (See Note to editors 9)
The FCA has also decided to impose a requirement on BCMUK to pay redress to clients who have suffered loss as a result of its failings. This decision has also been referred by BCMUK to the Tribunal for determination.
Penalty: GBP41 million fine
Topic: FCA has fined HSBC Bank plc £63.9 million for deficient transaction monitoring controls
Subject of Enforcement: HSBC Bank PLC
Date of Notice: 17/12/2021
Overview: FCA has fined HSBC Bank plc £63.9 million for deficient transaction monitoring controls
The FCA has fined HSBC Bank plc (HSBC) £63,946,800 for failings in its anti-money laundering processes.
HSBC used automated processes to monitor hundreds of millions of transactions a month to identify possible financial crime. However, the FCA found that three key parts of HSBC’s transaction monitoring systems showed serious weaknesses over a period of eight years from 31 March 2010 to 31 March 2018.
In particular, HSBC failed to:
consider whether the scenarios used to identify indicators of money laundering or terrorist financing covered relevant risks until 2014; and carry out timely risk assessments for new scenarios after 2016;
appropriately test and update the parameters within the systems that were used to determine whether a transaction was indicative of potentially suspicious activity;
check the accuracy and completeness of the data being fed into, and contained within, monitoring systems.
HSBC did not dispute the FCA’s findings and agreed to settle at the earliest possible opportunity, which meant it qualified for a 30% discount. Otherwise, the FCA would have imposed a financial penalty of £91,352,600.
HSBC has undertaken a large-scale remediation programme into its anti-money laundering processes, which was supervised by the FCA.
Mark Steward, Executive Director of Enforcement and Market Oversight at the FCA, said:
‘HSBC’s transaction monitoring systems were not effective for a prolonged period despite the issue being highlighted on numerous occasions. These failings are unacceptable and exposed the bank and community to avoidable risks, especially as the remediation took such a long time. HSBC continued their remediation to address these weaknesses after the relevant period.’
The FCA’s action relates to HSBC’s compliance with UK laws and the matters addressed in our Notice were not part of the action taken by the U.S Department of Justice in 2012.
Penalty: GBP64 million fine
Topic: FCA publishes warning notice statements for GAM International Management and Timothy Haywood
Subject of Enforcement: GAM International Management Limited and Timothy Haywood
Date of Notice: 16/12/2021
Overview: The Financial Conduct Authority (FCA) has fined GAM International Management Limited £9.1m and Timothy Haywood £230,037 for conflicts of interest and gifts & entertainment matters.
Both the Firm and Mr Haywood agreed to resolve all issue of fact and liability and so they qualified for a 30% discount. The financial penalties would have been £13m and £319,044 respectively, had they not agreed to resolve the case.
Final Notices would ordinarily be published, providing full details of the FCA’s case. However, another party who is not a subject of the Final Notices may be affected by them. Under the Financial Services & Markets Act, 2000, the FCA is required to consult with that party and provide them with an opportunity to make representations on the references to it before publication is possible.
In order not to delay notice of enforcement action, the FCA has instead published warning notice statements outlining the basis of its case against both the firm and individual involved. The links to these statements are Warning Notice Statement 21/5 and Warning Notice Statement 21/6.
The FCA will publish Final Notices when it is able and cannot comment further.
Penalty: GBP9 million fine for the regulated entity and GBP230,000 for the individual
Topic: National Westminster Bank Plc (NatWest) was fined £264,772,619.95 following convictions for three offences of failing to comply with money laundering regulations.
Subject of Enforcement: National Westminster Bank PLC
Date of Notice: 13/12/2021
Overview: NatWest has been convicted of three offences in relation to failing to comply with the 2007 Money Laundering Regulations. In a landmark case the Mrs Justice Cockerill, the sentencing judge at Southwark Crown Court, said:
‘….it must be borne in mind that although in no way complicit in the money laundering which took place, the Bank was functionally vital. Without the Bank – and without the Bank’s failures – the money could not be effectively laundered.’
NatWest pleaded guilty at Westminster Magistrates Court on 7 October. This is the first time the FCA has pursued criminal charges for money laundering failings.
The charges covered NatWest’s failure to properly monitor the activity of a commercial customer, Fowler Oldfield, a jewellery business based in Bradford, between 8 November 2012 to 23 June 2016. When taking on the customer, NatWest initially understood it would not handle cash from the Fowler Oldfield business. However, over the course of the customer relationship approximately £365m was deposited with the bank, of which around £264m was in cash.
Some of the bank’s employees, who were responsible for handling these cash deposits, reported their suspicions to bank staff responsible for investigating suspected money laundering, however no appropriate action was ever taken. The ‘red flags’ that were reported included significant amounts of Scottish bank notes deposited throughout England, deposits of notes carrying a prominent musty smell, and individuals acting suspiciously when depositing cash in NatWest branches. In addition, the bank’s automated transaction monitoring system incorrectly recognised some cash deposits as cheque deposits. As cheques carry a lower money laundering risk than cash, this was a significant gap in the bank’s monitoring of a large number of customers depositing cash, of which Fowler Oldfield was one.
A separate investigation by West Yorkshire Police has led to 11 people pleading guilty to charges relating to the cash deposits and three cash couriers being charged. A further 13 individuals are awaiting trial at Leeds Crown Court on 25 April 2022 in relation to the activities of Fowler Oldfield.
Mark Steward, Executive Director of Enforcement and Market Oversight at the FCA, said:
‘NatWest is responsible for a catalogue of failures in the way it monitored and scrutinised transactions that were self-evidently suspicious. Combined with serious systems failures, like the treatment of cash deposits as cheques, these failures created an open door for money laundering. Anti-money laundering controls are a vital part of the fight against serious crime, like drug trafficking, and such failures are intolerable ones that let down the whole community, which, in this case, justified the FCA’s first criminal prosecution under the Money Laundering Regulations.’
Penalty: GBP265 million fine