The FCA has fined Mako Financial Markets Partnership £1,662,700 ($2.1mn) for failing to ensure it had effective systems and controls to guard against financial crime. Mako also failed to adequately apply the policies and procedures it did have in place.
Between December 2013 and November 2015, Mako executed purported over-the-counter equity trades on behalf of clients of the Solo Group, worth approximately £68.6 billion in Danish equities and £23.6 billion in Belgian equities. Mako received commission of approximately £1.45 million.
The trading was circular, which is highly suggestive of financial crime. It appears to have been carried out to allow the arranging of withholding tax (WHT) reclaims in Denmark and Belgium. Several individuals have now been convicted in Denmark as part of this scheme.
Mako additionally failed to identify red flags in other instances related to the Solo Group business. This involved a series of transactions which had no obvious rationale, and which resulted in the Solo Group’s controller incurring a €2m loss, to the benefit of his business associates. Mako also received payment from a United Arab Emirates-based third party connected to the Solo Group for outstanding debts owed by the Solo Group’s clients without performing any due diligence which created an increased risk of money laundering. As Mako has not disputed the FCA’s findings and agreed to settle, it qualified for a 30% discount on its fine under the FCA’s settlement discount scheme.
Therese Chambers, joint executive director of enforcement and market oversight, said in a statement: “Mako failed to spot clear red flags and facilitated highly suspicious trading that made it vulnerable to being used to support financial crime. For UK financial services to grow and compete, investors need to have trust in it. That’s why it is vital we stamp out these unacceptable practices which risk the reputation and integrity of UK markets.”
This eighth enforcement case brought by the FCA, concludes its investigations into cum-ex trading. Working closely with EU and global law enforcement agencies, the FCA has imposed fines of more than £30 million in relation to this trading.