Financial Conduct Authority  

FCA and PRA slap Goldman Sachs with £97m fine

FCA and PRA slap Goldman Sachs with £97m fine

The UK's regulators have fined finance giant Goldman Sachs almost £100m over its part in a Malaysian investment scandal. 

Between 2012 and 2013 Goldman Sachs underwrote, purchased and arranged three bond transactions for 1MDB, raising $6.5bn for the Malaysian state-owned development company which has been at the centre of embezzlement allegations for years.

In a joint statement yesterday (October 23) the Financial Conduct Authority and Prudential Regulation Authority confirmed they had each fined Goldman Sachs £48.3m for risk management failures in relation to 1MDB - with a bill totalling £96.6m. 

The fines were part of a $2.9bn (£2.2bn) global settlement between Goldman Sachs and various other authorities including the US Department of Justice and the Monetary Authority of Singapore.  

Mark Steward, executive director of enforcement and market oversight at the FCA, warned firms had a "crucial role" to play in tackling financial crime and helping to maintain the "integrity of the financial system".

Mr Steward said: "GSI’s failure to take appropriate action in this case shows that it did not take this responsibility seriously.

"When confronted with allegations of bribery and staff misconduct, the firm’s mishandling allowed severe misconduct to go unaddressed. There is no amnesty for firms that tackle financial crime poorly, and the size of GSI’s fine reflects that."

According to the FCA, the investment banker and manager had failed to address allegations of bribery in 2013 and neglected to manage allegations of misconduct in connection with 1MDB in 2015.

The regulators also found the 1MDB transactions had involved clients and counterparties in jurisdictions with "higher financial crime risk".

The FCA said: "GSI was also aware of the risk of involvement of a third party that Goldman Sachs had serious concerns about. 

"Goldman Sachs failed to assess and manage risk to the standard that was required given the high risk profile of the 1MDB transactions, and failed to assess risk factors on a sufficiently holistic basis."

Sam Woods, deputy governor for prudential regulation and chief executive of the PRA, said the seriousness of the case was reflected in the size of the fine. 

He added: "Failure to manage financial crime risk can have a significant adverse impact on a firm’s safety and soundness.  

"We expect firms to manage risk, including financial crime risk, prudently and holistically and for allegations of bribery and misconduct to be taken very seriously." 

In a statement on the company's website David Solomon, chairman and chief executive of Goldman Sachs, said: "This has been a long process and we are pleased to be putting these matters behind us. But, we are not putting the lessons learned from this experience behind us." 

As Goldman Sachs agreed to resolve the case with the regulators it qualified for a 30 per cent discount on its penalty, without this the FCA and PRA would have imposed a fine of £69m each.