Barclays Fined £72m Over Risky £1.88bn Deal

Barclays (LSE: BARC.L - news) has been fined £72m by the City regulator over its handling of a £1.88bn deal involving risky super-rich clients.

The Financial Conduct Authority (FCA) said the fine for the bank was "for failing to minimise the risk that it may be used to facilitate financial crime".

It (Other OTC: ITGL - news) relates to a £1.88bn deal that Barclays arranged and carried out in 2011 and 2012 for "a number of ultra-high-net-worth clients" - and netted the bank more than £50m.

The clients were listed as "politically exposed persons" (PEPs) meaning that Barclays should have subjected them to enhanced levels of due diligence and monitoring, the FCA said.

The fine is the largest levied by UK regulators for financial crime failings.

Instead, Barclays applied a lower level of checks than it would have done on a less risky deal.

PEPs include individuals outside the UK who may be able to abuse their public position for private gain, meaning a greater risk of bribery and corruption.

The FCA said: "Barclays did not follow its standard procedures, preferring instead to take on the clients as quickly as possible and thereby generated £52.3m in revenue. Barclays went to unacceptable lengths to accommodate the clients."

During an early stage of arranging the deal, when it was thought it could be for a larger sum, one senior manager said it could be "the deal of the century", the regulator found. It was also referred to as an "elephant deal" due to its size.

Barclays did not obtain information that it was obliged to from the clients to comply with financial crime requirements - because it did not wish to inconvenience them, the FCA said.

It agreed to keep the deal strictly confidential, even within the firm - even agreeing to pay £37.7m should it breach these restrictions. Few people knew of where to find the bank's due diligence records on the deal - kept on hard copy and not on its systems, making it harder for it to respond to the regulator's request for information.

The transaction involved a complex financial investment that was the largest of its kind that Barclays had carried out for individuals.

Mark Steward, director of enforcement and market oversight at the FCA, said: "Barclays ignored its own process designed to safeguard against the risk of financial crime and overlooked obvious red flags to win new business and generate significant revenue. This is wholly unacceptable."

Among the findings of the regulator were that senior managers at the time failed to oversee financial crime risks involved in the deal properly and did not corroborate the clients' sources of wealth. It made no finding that the transaction did, in fact, involved financial crime.

The fine comes just a week after Barclays was handed a new $150m (£99m) penalty by US authorities over foreign exchange rate rigging - to add to a £1.53bn settlement with US and UK regulators over forex earlier this year.

In 2012, Barclays was fined a total of £290m over the Libor scandal in which traders manipulated the key interbank lending rate.

New (KOSDAQ: 160550.KQ - news) chief executive Jes Staley is preparing to take the reins at Barclays next week.

The bank said: "Barclays has cooperated fully with the FCA throughout and continues to apply significant resources and training to ensure compliance with all legal and regulatory requirements (Other OTC: UBGXF - news) ."