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Barclays is under investigation by the FCA for "persistent" KYC and AML failures

Barclays PLC is being investigated by Britain's financial regulator for alleged compliance and anti-money laundering system failures.

After observing a series of anti-money laundering events, the Financial Conduct Authority (FCA) has ordered an independent review of Barclay's systems.

Last year, the FCA requested a "skilled persons review," or Section 166, from the heads of Barclay's corporate banking, UK retail, and wealth divisions.

Typically, Section 166 entails the employment of an outside agency to prepare reports with recommendations for improvement.

The FCA has thus far declined to comment, and Barclays has not yet responded to requests for comment.

The regulator filed a notice last year requesting an independent evaluation of the lender's AFC systems after becoming worried about the number of KYC and AML incidents.

The Financial Times, which was the first to publish the incident, cited sources as saying, "While individually the cases had been relatively minor, the volume of them added up to a concerning pattern."

Typically, an external accounting or legal company conducts an investigation and produces a report with recommendations for improvement as part of the Section 166 skilled person review.

This is part of the FCA's supervision tools, not its enforcement instruments. If proof of misconduct is discovered, the ensuing report may be sent to the enforcement branch of the watchdog for its own inquiry.

It was reported that the FCA sent Section 166 letters to Matt Hammerstein, who oversees the ringfenced UK retail and wealth sector, and Alistair Currie, who formerly served as head of corporate banking.

Currie is currently the Chief Operating Officer and a member of the group's executive committee as of December.

The bank is scheduled to release its annual earnings report the following week, but it has not disclosed the Section 166 requirement in earlier filings.

Under the leadership of its new chief executive, Nikhil Rathi, the FCA has pledged to adopt a more active approach to enforcement, warning UK-based banks that their monitoring and reporting systems are inadequate.

In December 2021, HSBC received a £64M penalties for "serious weaknesses" in its AML controls up to 2018 — included retaining an account for the leader of a criminal gang.

NatWest was the first financial institution to plead guilty under AML regulations and was fined £265 million for failing to prevent a £365 million money laundering operation. When it was revealed that £700,000 had been transported through a shopping center in black garbage bags, widespread astonishment ensued.

In December of last year, Santander UK paid a hefty £107.8M fine for failing to properly monitor its systems and ignoring red flags regarding suspected cash flows via its accounts.

This is merely the most recent difficulty for Barclays, which has clashed with regulators and struggled with compliance lapses in recent years.

Jes Staley was forced to resign as CEO in November 2021 due to an investigation into his former contact with Jeffrey Epstein. Furthermore, other issues include:

- Last year, Barclays agreed to pay $361 million to the US Securities and Exchange Commission and put aside £450 million to compensate investors after marketing $17.7 billion of unapproved structured financial products.

- The SEC and the Commodity Futures Trading Commission penalized a group of banks $200 million for employees' unauthorized use of WhatsApp and Signal.

- In June 2021, Barclays paid £48 million in compensation to nearly 1,500 clients who were unlawfully marketed timeshare loans in Malta.

- In June 2021, Barclays paid £48 million in compensation to nearly 1,500 clients who were unlawfully marketed timeshare loans in Malta.

Meanwhile, the Payment Systems Regulator penalised Barclays £8.4 million last year for failing to provide retailers with complete payment card cost information.


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