Sapien Capital: FCA fines £ 170k for authorizing Solo Group money laundering


The role of Sapien Capital is to execute alleged OTC share transactions worth approximately £ 2.5bn in Danish stocks and £ 3.8bn in Belgian stocks.

Sapien Capital Ltd has been fined £ 178,000 by the Financial Conduct Authority, with the fine reduced by £ 219,100 due to severe financial hardship.

In FCA’s first case concerning cum / ex trading, dividend arbitrage and withholding tax recovery (WHT) operations, the regulator noted that the failures of Sapien Capital led to the risk of facilitating fraudulent transactions and money laundering.

In 2015, Sapien did not put in place adequate systems and controls to identify and mitigate the risk of being used to facilitate fraudulent transactions and money laundering in connection with activities introduced by the Solo group.

Solo Group has traded on a circular pattern of very high value corporate transactions to avoid the normal need for payments and delivery of securities in the settlement process.

The trading model involved the use of over-the-counter (OTC) stock transactions, securities lending and futures transactions, involving EU stocks, on or around the last day the securities were dividend.

According to the FCA investigation, no change in ownership of the shares traded by Solo clients, nor the custody of shares and settlement of trades by the Solo group has taken place.

In combination with their scale and volume, the practice suggested financial crime, presumably undertaken to create an audit trail to support withholding tax claims in Denmark and Belgium.

The role of Sapien Capital is to execute alleged OTC share transactions worth approximately £ 2.5bn in Danish stocks and £ 3.8bn in Belgian stocks.

Without exercising skill, care and diligence in applying anti-money laundering policies and procedures, Sapien also failed to properly assess, monitor and mitigate the risk of related financial crime. with clients introduced by the Solo group and the so-called trading.

Mark Steward, Director of Law Enforcement and Market Surveillance, said: “These transactions entailed money laundering and other financial crime risks that Sapien did not incompetently understand. . “

“The FCA expects companies to have systems and controls that test the purpose and legitimacy of transactions, reflecting skepticism and vigilance about the risk of money laundering and financial crime, and failures here. constitute serious misconduct. “

In the Authority’s executive settlement proceedings, Sapien qualified for a 30% reduction, with the amount further reduced by £ 219,100 to reflect Sapien’s severe financial difficulties.

UK banks and financial services firms have made frequent use of settlements with the UK Financial Conduct Authority (FCA) over the past eight years, the mechanism raising concerns and calling for legislative changes.

The top five discounts applied to individual fines for currency manipulation penalties were all close to £ 100million each, for UBS, Deutsche Bank, Citibank, JP Morgan and RBS.

Companies subject to FCA enforcement actions can benefit from discounts of up to 30% on their fines if they settle the case.

In 2017, Lord Sharkey, co-founder of the think tank, proposed an amendment to the Criminal Finance Bill that would require banks and other financial firms to take disciplinary action against the employee (s) responsible for the breach before they could receive the entire reduction on an FCA fine.

According to Lord Sharkey, the amendment would allow the FCA “to have a direct view of the process and behavior improvements agreed to in any regulation.” This would allow him to see that appropriate disciplinary action has been taken against those responsible for the transgressions. This would give settlement firms a powerful incentive to meet all settlement conditions. To do so, he would return a portion of any remittance that could be withheld until the settlement company satisfied the FCA that all appropriate disciplinary action had been taken. Only then will the full discount be realized. “

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