FCA Fines Barclays $61.7 Million

The Financial Control Authority (FCA) has fined Barclays Bank $61.7 million for failing to properly protect clients’ custody assets worth £16.5 billion. As a result clients risked incurring extra costs, lengthy delays or losing their assets if Barclays had become insolvent.

It was the highest fine ever imposed by the FCA or its predecessor the FSA for client assets breaches, reflecting ‘significant weaknesses’ in the systems and controls in Barclays’ Investment Banking Division between November 2007 and January 2012 and the number of affected accounts.

“Safeguarding client assets is key to maintaining market confidence if firms fail – Barclays lack of focus on the rules was unacceptable,” said David Lawton, FCA director of markets. “Our on-going scrutiny of firms’ compliance reflects the importance of the regime, which protects custody assets worth £10 trillion held in the UK.”

Tracey McDermott, FCA director of enforcement and financial crime, said that “Barclays failed to apply the lessons from our previous enforcement actions, numerous industry-wide warnings, and exposed its clients to unnecessary risk.”

“All firms should be clear after Lehman that there is no excuse for failing to safeguard client assets,” McDermott said.

McDermott said that Barclays failed to properly apply these rules when opening 95 custody accounts in 21 countries.

As a result, Barclays’ records did not correctly reflect which company within its Investment Banking Division was responsible for the assets in the accounts. Barclays also failed to set up appropriate legal arrangements with these companies.

These failings were compounded by flaws in account naming or incorrect data that suggested assets belonged to Barclays instead of its clients.

This breached the FCA’s Client Asset Rules and requirements that firms should have adequate management, systems and controls and properly safeguard clients’ assets.

Barclays agreed to settle at an early stage, qualifying for a 30% discount. Without this, the FCA would have imposed a penalty of $88.3 million

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