The Financial Conduct Authority has fined an investment advisory and wealth management firm for its failings in conduct and openness with the regulator.
Julius Baer International (JBI), a Swiss-based bank, has been fined £18mn for failing to conduct its business with integrity, failing to take reasonable care to organise and control its affairs and failing to be open and cooperative with the FCA, according to a statement by the City watchdog today (November 30).
Three of the group’s former employees have also been banned by the FCA, but they have all referred their decision notices to the Upper Tribunal, disputing many of the facts.
Gustavo Raitzin, former regional head for Bank Julius Baer (BJB), Thomas Seiler, former sub-regional market head for Russia and eastern Europe and non-executive director at JBI, and Louise Whitestone, former relationship manager on JBI’s Russian and Eastern European Desk, have all been banned.
The FCA concluded that JBI paid ‘finder’s fees’ (a commission paid to the facilitator of an introduction or transaction) to Dimitri Merison, an employee of Yukos Group.
Yukos Group was formerly one of the biggest oil companies in Russia, and has been embroiled in legal wranglings after the Kremlin was accused of illegally expropriating the company's assets.
The regulator said the introduction of Yukos to JBI was done on the understanding that the Yukos Group companies would then place large cash sums with JBI from which it could generate significant revenues.
The FCA highlighted uncommercial FX transactions that were made in which the Yukos Group companies were charged much more than standard rates, with the profits being shared between Merison and JBI.
Merison received commission payments totalling $3mn (£2.5mn), which the FCA said were “improper” and, together with the FX transactions, showed a “lack of integrity” in the way JBI was undertaking this business.
JBI also failed to have adequate policies and procedures in place to identify and manage the risks arising from relationships between JBI and ‘finders’, external third parties that introduced potential clients to the company in exchange for a commission.
“This included having no policies which defined the rules surrounding the use of finders within JBI until after June 2010,” the statement said, with the FCA adding that policies introduced after that date were inadequate.
The FCA said JBI became aware of the nature of these transactions, including the payments to Merison, in 2012, and suspected a potential fraud had taken place but did not report this to the FCA until July 2014.
Executive director of enforcement and market oversight, Mark Steward, said there were “obvious signs” that the relationships here were corrupt, which senior individuals saw and ignored.
“These weaknesses create the circumstances in which financial crime of the most serious kind can flourish.
“The FCA’s decisions on the individuals whom the FCA alleges were involved in these failures will now be reviewed in the Upper Tribunal.”