Barclays has been hit with a $109 million fine after it kept a deal with its super-rich clients so secret that it bought a new safe just to store the deal’s documents.
The U.K. Financial Conduct Authority (FCA) fined Barclays £72 million ($109 million) on Thursday for skipping its own rules on making background checks on clients and the origin of their cash, and whether they were placed on international sanctions lists.
Barclays continues to say no crime had been committed, and that it “continues to apply significant resources and training to ensure compliance with all legal and regulatory requirements.”
Regulators disagree and claim that employees for the bank went to great lengths in order to hide £1.9 billion in transaction ($2.8 billion), including from the bank’s own staff, “threatened confidence in the U.K. financial system.”
By “bending over backwards” for super-rich clients, the FCA says Barclay’s earned £52 million in commission.
The FCA said it tripled the size of the fine in order to act as a deterrent to other banks attempting the same type of activity.
Known as an “elephant deal” inside Barclays, the transaction took place in 2011-2012. One senior banker said it could be “the deal of the century,” according to the regulators.
It is not clear if former CEO Bob Diamond was aware of the deal.
The FCA says a heftier fine would have been imposed had Barclay’s staffers not fully cooperated during the early parts of the investigation.
According to the regulator, Barclays:
1. Did not sufficiently corroborate the clients’ stated source of wealth and source of funds for the transaction.
2. Omitted client names from internal systems, meaning the bank could not carry out crosschecks against international sanctions and court order lists.
3. Relied on public Internet pages to verify the clients’ sources of wealth.
4. Rushed the deal through so quickly the bank had received the cash before it had any assurance as to the source of the funds.
5. Opened and closed offshore accounts quickly just to process this transaction.
The most troubling aspect appears to be that employees were told to keep deal hidden from colleagues.
Some of the documents related to the trade were held in hard copy by Barclays “in a safe purchased specifically for storing information relating to the business relationship.”
The FCA says few employees even knew of the safe’s location.