According to sources familiar with the matter, the UK financial regulator is investigating Barclays for alleged persistent failures in its compliance system and anti-money laundering systems.
After becoming concerned by the number of AML and know-your-customer incidents, the Financial Conduct Authority issued a notice in the spring of last year directing an independent review of the lender’s systems to detect and prevent financial crime.
Although the individual cases were minor, their combined volume created a worrying pattern.
This is called a Section 166 (or skilled person review) and involves an outside accounting firm or law firm looking into the matter and recommending improvements.
These reviews are part of the FCA’s supervision, not enforcement tools. If there is evidence of wrongdoing, these reviews can be referred back to the enforcement division of the FCA.
According to the Financial Times, Matt Hammerstein, head of the ringfenced UK retail division and wealth division, was addressed Section 166 letters by the FCA. Alistair Currie, former head of corporate banking, was also addressed in Section 166 letters.
Currie was promoted to chief operating officer in December. He joined the group executive committee as part of a management reshuffle that also included the appointment of Vim Maru, a former Lloyds retail banker, as global head for consumer banking and payment.
Next week, the bank will report its annual earnings. Previous filings have not included the Section 166 requirement.
Barclays declined to comment, as did the FCA.
Barclays is not the only company having problems with regulators. In recent years, Barclays has also had to deal with compliance issues and clashed with regulators. In November 2021, Jes Staley, the ex-chief executive officer, was forced to resign amid an investigation into his relationship with Jeffrey Epstein. Throughout the entire process, Staley was supported by the bank’s board. Staley appeals against the decision.
Barclays paid $361mn to US Securities and Exchange Commission and put aside £450mn for investors to compensate them after it accidentally sold $17.7bn in structured financial products that it didn’t have authorization for.
Barclays was also among a group of banks that were fined $200mn each by the SEC, the Commodity Futures Trading Commission and others for employees’ unauthorised usage of encrypted messaging services like Signal and WhatsApp.
In June 2021, Barclays was required to compensate almost 1,500 customers for being wrongly sold timeshare loans to Malta. Barclays Partner Finance was the trading name for Clydesdale Financial Services Limited. It had a partnership agreement with Azure Resorts, a now-defunct timeshare operator.
After a series of scandals, the FCA has promised to be more aggressive in enforcement and has warned UK banks that their reporting and oversight systems are not up to par.
HSBC was fined £64mn in December 2021 for its “serious flaws” in AML controls, including the management of an account for a leader of a criminal gang.
NatWest, the first lender to admit guilt in accordance with AML laws, was also fined £265mn. This was for failing to stop a £365mn money laundering scheme that involved £700,000.000 being transported through a shopping center using black bin liners.
Santander UK was penalized for failing to properly manage its systems and not noticing red flags regarding suspicious cash flows.
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