FCA fines broker £289,000 for financial crime failures

The FCA has fined interdealer broker Arian Financial £288,962.53 for failing to ensure it had effective systems and controls against financial crime. 

The regulator says this put Arian at risk of being used to support fraudulent trading and money laundering on behalf of clients of the Solo Group.  

This is the seventh case brought by the FCA in relation to cum-ex trading and withholding tax schemes, with total fines of more than £22 million in relation to this trading. 

Arian executed purported over-the-counter equity trades of approximately £37 billion and £15 billion in Danish and Belgian equities on behalf of the Solo Group’s clients, receiving commission of approximately £546,949. 

The trading was, throughout the period, circular, which is highly suggestive of financial crime. It appears to have been carried out to allow the arranging of withholding tax reclaims in Denmark and Belgium.  

In 2014 and 2015, the Solo Group made withholding tax reclaims of £899.27 million and £188.00 million to Danish and Belgian authorities, with approximately £845.90 million and £42.33 million respectively paid.  

Arian admitted liability but referred the FCA’s proposed fine to the Upper Tribunal. The Tribunal reduced the fine that the FCA would have imposed from £744,745 to £288,962.53. The Tribunal agreed with the FCA’s assessment of the seriousness of the misconduct and the need to impose a penalty. However, the Tribunal reduced the fine as, in the circumstances, it considered the financial benefit Arian received should be net of certain fees Arian paid to Solo and the broker in respect of the trades. 

Steve Smart, joint executive director of enforcement and market oversight at the FCA, said: “Arian failed to identify red flags which ought to have been obvious. The controls the firms we regulate have in place are an important line of defence against our financial system being abused for criminal ends. Arian’s fell short of what we expect. We are pleased that the Tribunal recognised the seriousness of Arian’s misconduct."