Barclays is fined £72m for secret deals with mega-rich: Bank shamed over no-questions-asked policy that left Britain vulnerable to financial crime
- City watchdogs say Barclays adopted a no-questions-asked policy
- Bank did not check where ultra-wealthy clients’ money came from
- £72million fine has been imposed on the bank for turning a blind eye
Barclays has been shamed over a murky £1.9billion deal with ultra-wealthy clients which left the country vulnerable to financial crime.
The High Street giant adopted a no-questions-asked policy to secure what one employee called ‘the deal of the century’, according to City watchdogs.
It was so top secret that documents were stashed in a specially bought safe and no records were stored on the bank’s computer systems.
The Financial Conduct Authority imposed a record £72million fine on the bank for turning a blind eye.
Barclays was so desperate not to ‘irritate’ its ‘ultra high net worth clients’ that it did not bother to check where their money came from or if they were involved in financial crime or terrorism.
This ‘threatened confidence in the UK financial system and failed to mitigate the risk to society of financial crime’, added the FCA.
Last night Tory MP Mark Garnier, a member of the Treasury Select Committee, said the scandal showed the gulf ‘between the way banks treat ordinary customers and billionaires who are given special favours’.
The complicated deal was carried out in 2011 to 2012 but Barclays failed to make proper checks until November last year. Even then, it only acted after the watchdog intervened.
The failings were particularly serious due to the sheer volume of money involved and because the clients were ‘politically exposed persons’, meaning they were more vulnerable to bribery and corruption.
Such people can include high-ranking public officials and wealthy foreigners living in corrupt regimes such as Iran, Libya and Syria.
The transaction involved bonds and complex financial instruments held in an offshore trust to protect the clients’ money and pay them a guaranteed income for decades.
As part of the deal, the biggest of its kind ever struck by Barclays, it would have paid the clients almost £38million if a strict confidentiality agreement was broken. Only an inner circle of staff knew anything.
To keep their identities secret, the clients used offshore companies, a trust and temporary bank accounts. Money was sent to Barclays anonymously in 20 transfers.
The bank did query one request to pay tens of millions of dollars to a third party. The payment was withdrawn, which should have set alarm bells ringing, said the FCA.
Instead Barclays ‘went to significant lengths to accommodate the clients’ to win the business.
One manager wanted to ‘race through’ the huge transaction – dubbed an ‘elephant deal’ by staff – as it generated £52.3million in fees.
Mark Steward, FCA director of enforcement and market oversight, 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.’
The fine is by far the biggest for failing to prevent financial crime, dwarfing the £8.75million paid by Coutts in 2012.
It includes all the money Barclays received from clients which it has been forced to hand back. Most of the fine will go to the Treasury after the FCA deducts some for its costs.
Barclays refused to reveal how many staff were involved and if anyone has been sacked. It also refused to say if the deal is still in place.
Senior bosses in charge at the time have since left, including chief executive Bob Diamond.
The watchdog stressed it had not uncovered any crime. A bank spokesman added: ‘Barclays has co-operated fully with the FCA and continues to apply significant resources to ensure compliance with all legal and regulatory requirements.’