Barclays have been fined £72 million for their failure to apply proper money laundering standards to a single deal, suggested to be worth £52 million to the bank and involving Qatari business people.
The deal took place in 2011 or 2012 and there is no excuse for Barclays not applying the procedures: everyone in financial services knows they have not only to be applied but that they must be enhanced in the case of such politically sensitive cases.
It is, then, appropriate that Barclays have been fined. But that is not the end of the issue. Three issues are of continuing concern.
The first is that despite all the awareness of money laundering issues this abuse occurred. It is clear that legislation and systems have not over-turned the culture of the blind eye. Corruption would appear to persist at the heart of a major bank. I think it safe to assume it is not alone.
Second, Barclays must have presumed it could get away with this offence or it would not have permitted the action. This raises questions about the regulatory regime. Is it really adequate? I doubt it.
Third, what this shows is that having a veneer of law and all the supposed systems of paperwork in place for routine transactions for the sake of regulators will not prevent money laundering risk when there is complicit agreement to ignore such procedures. This happened. So what happens in tax havens, where compliance with the law has always been considered a little less important? What is the risk there? I would suggest it is at least as high as in London, and maybe worse.
My point is that the culture of abuse persists, and that is what really worries me.
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We Gentleman Bankers of London have no truck with money laundering, and only ever handle money that we know to have been properly laundered already.
My thoughts on that deal and the prosecution?
It’s encouraging that the FCA imposed a fine that wiped out the profit on the deal – fines are often no economic deterrent at all – but I question whether fining one particular deal is enough to impose effective control on a business that engages in many, many other transactions, and was specifically criticised for poor controls and a culture of non-compliance.
The punitive impact is that Politically Exposed Persons who have succeeded in laundering and segregating the respectable parts of their business interests to the standards required by London will be deterred from doing business with Barclays because of the enhanced scrutiny that follows this kind of court case.
Or the enhanced scrutiny which we might assume to follow a succesful prosecution.
How do these fines fit in with Barclay’s business operations, are they tax deductible? How olong do they get to pay?
“Do they actually change behaviour? I don’t think there is much evidence of that,” Sue Lewis, chair of Britain’s Financial Services Consumer Panel, told a CityUK conference.
“Do they work in the sense of hurting companies and to make them want to change their behaviour? I think the jury is still out and the answer is probably not,” Lewis said.
If a person fails to comply with
the Money Laundering Regulations, they
may face a civil financial penalty or criminal prosecution that could result in
an unlimited fine and/or a prison term of up to 2 years.
I tend to think a 2 year all inclusive holiday sewing mailbags at the grey bar hotel might not only be more cost effective, but more effective in outcome than these irritating fines.
I think the question on the fines is a good one
It goes to the FCA
They can use it to reduce regulatory fees to banks…..
The fine should not be tax deductible but this is decided on a case by case basis
Probably worth looking into the ownership of Barclays at the time of the incidents. Why do you think so many Middle Eastern investors were so keen to grab a slice of a respected global bank. Dirty money always needs a clean home!
I believe it’s a cultural issue that needs to be tackled from the top. The business models that provide that corruptive incentive needs to be addressed. The bonus scheme itself can be a great contributing factor (if not the main) for such an action by senior management to skim-past compliance in order to rush the deal through.
This may be an appropriate opportunity to offer my suggestion re. Music for The Economy of 2015
The Members 1979 punk/reggae hit “Offshore Banking Business” has become increasingly relevant over time.
I couldn’t find the lyrics anywhere but they are pretty clear in the song.
http://damnlyrics.com/lyrics/Offshore-Banking-Business-The-Members-7QlGoNqx.html
Up there now
Thanks
Shock headline – bank in money laundering scandal.
It is just like FIFA in the sense that those of us who have had much contact with the sector (and done the training…) know full well that it’s just another cause of different laws for the rich and poor. If you want to open a savings account for your granny you’ll go through all the tedious paper work, but if you’ve a £100m or so, well thats a different matter. And you won’t find it written in their procedures manuals. But your bankers bonus might depend on it…
Barclays had a Professor of leadership, governance and ethics on their board until not so long ago – Sandra Dawson. Didn’t make a lot of difference to culture at the top. Wonder if anyone has ever had a firm conversation with her about what she was up to her during her tenure?
Not being funny but ISIL are said to be the richest terrorist group in history.
Is that all being done cash in hand?
If not, who holds ISIL’s A/Cs?
Well spotted.
The thought occurs as to whether any of that laundered money was originally funds from ISIS oil sales?
Is treason still a capital offence?