Despite continuous warnings, fines, apologies and promises to do better, mis-selling and misconduct remains a problem in British banking. Barclays are the latest bank to suffer a high-profile scandal after being fined £72 million by city regulator the Financial Conduct Authority (FCA) – a strong indication that the era of banking misbehaviour is not yet a thing of the past.
This latest fine shows the disparity between the way Barclays have treated ordinary customers and wealthy clients, according to a member of the Treasury Select Committee, and it vastly eclipses their £7.7 million fine for mis-selling back in 2011. Since 2009, Barclays have been fined £500 million in total.
The fine is for an “elephant deal” worth a staggering £1.88 billion which took place in 2012. The wealth management deal was arranged on behalf of ultra-rich clients whose identities were kept confidential, with Barclays in the running to make a £50 million profit for handling the money.
This was the biggest deal of its kind for Barclays, so big that only a few even within the bank knew about it. The elephant deal – so called when a deal is worth £20 million or more – involved a number of PEPs, or politically exposed persons, and extensive precautions were put in place to ensure its secrecy.
The wealthy clients kept their identities safe by using an intricate structure of offshore companies, temporary bank accounts, and bonds and other financial instruments held offshore. Barclays received money anonymously in 20 transfers and would have had to hand out around £38 million to the clients if the confidentiality agreement was broken.
The FCA took note of the transaction and found that Barclays did not carry out thorough checks where the money was coming from, relaxing its own security rules in order to facilitate the deal. As a result they exposed themselves to major financial crime, risking the bank being used for money laundering or even to fund global terrorism.
FCA Director of Enforcement and Market Oversight Mark Steward said: “Barclays ignored its own process designed to safeguard against the risk of financial crime and overlooked obvious red flags to win business and generate significant revenue. This is wholly unacceptable.”
Treasury Select Committee member MP Edward Garnier said the fine brought to light the disparity “between the way banks treat ordinary customers and billionaires who are given special treatment.”
While this is the biggest fine to date that the FCA has enforced for failures to act in accordance with the anti-financial crime rules, there have been no findings that Barclays have expedited any financial crimes in relation to the transaction. A bank spokesman stated: “Barclays has cooperated fully with the FCA and continues to apply significant resources to ensure compliance with all legal and regulatory requirements.”
The fact remains, however, that Barclays have come under fire far too many times for unscrupulous banking practices. Practices that cause discomfort and outrage at every level of society, from everyday customers to politicians and city regulators. It’s not clear when the age of continual bank scandals will be behind us, but it is clear that the banks will end up shelling out billions in fines before that happens.