Boutique investment bank fined for serious anti-money laundering failings

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A boutique investment bank has been fined £178,000 by the Financial Conduct Authority (FCA) for failings which ran the risk of enabling potentially fraudulent share trading and money laundering.  The City regulator said that Sapien Capital had been willing to cut corners in its due diligence process in an effort to secure £billions in share trading business from clients of an introducer, the Solo Group.

The transactions appeared to relate to a form of share dealing known as ‘cum-ex’ trading, where a now-closed tax-loophole has enabled parties to dishonestly claim government tax rebates to which they were not entitled. Cum-ex trading has cost European Treasuries billions in lost tax revenue.

In early 2015 Sapien Capital took on 166 clients introduced by the Solo Group.  The FCA identified failings in Sapien’s onboarding procedures of these clients and said it had failed to detect or question numerous red flags while taking on the business.  Sapien conducted over £6 billion of purported equity trades on behalf of Solo Group’s clients, earning nearly £300,000 in commissions.

The regulator said that Sapien had breached Principle 2 and 3 of the FCA’s Principles of Business and “failed to exercise due skill, care and diligence in applying anti-money laundering policies and procedures and in failing properly to assess, monitor and mitigate the risk of financial crime in relation to clients introduced by the Solo Group and the purported trading”.

James Burgoyne of Brunel Professions says that the regulator is clamping down hard on anti-money laundering failings.  “This case shows the huge risk to financial firms of cutting corners to chase business.  Compliance procedures are put in place to avoid these type of risks and firms put themselves at in real danger if they fail to conduct proper due-diligence or ignore red flags.”

The FCA’s press release and Final Notice have been published on its website.  Articles about the case have been published by Macfarlanes, Mishcon de Reya and City AM.  Details of ‘cum-ex’ trading scandal have been published by Wikipedia.

Professionalindemnity.com is owned by Brunel Professions, which is a leading professional indemnity insurance broker in the UK.  Click here to get a quote or call 0345 450 1074 to speak to a broker.

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