Macquarie Bank Hit with £13M Fine for Serious Internal Control Failures
FCA has fined Macquarie Bank Limited’s London branch £13 million over ‘serious failings’ in internal systems. The fine relates to trade misconduct at the London Macquarie metals and bulk trading desk. A trader named Travis Klein engaged in more than 400 fictitious trades from June 2020 to February 2022 to conceal trading losses. Over 20 months passed before the actions were uncovered, highlighting certain deficiencies in the bank’s supervision.
Fictitious Trades and Concealed Losses
The FCA pointed out numerous failings in Macquarie’s internal environment, enabling Klein to avoid several mechanisms and fabricate unnoticed transactions. This misconduct was carried out from June 2020 to February 2022, and it cost around $57.8 million to reverse all the fraudulent trades.
The regulator highlighted that the trades did not impact clients and the overall market. However, it highlighted the need to set up efficient systems of controls to check insider misconduct. Steve Smart, joint executive director of enforcement and market oversight at the FCA, described the case to showcase the need to maintain considerable standards of internal risks and implement reliable measures to risk potential impairment.
Legal Measures and Legal Consequences
Macquarie Bank complied with the FCA’s investigative efforts and achieved a 30% reduction in the penalty. The bank accepted the FCA observations as valid and affirmed its ability to rectify the weaknesses. The regulator also barred Klein from engaging in the financial services business because of his dishonesty. He managed to escape a £72,000 fine because he could prove that he had considerable difficulties paying this amount.
In a statement, Macquarie Bank said it reported the incident in 2022, pointing to the unauthorized trade as an isolated incident that had no material effect on its business. Some of the observations made by the bank included improving bureaucracy after the event due to an enhanced control environment.
Steps Taken to Improve Controls
Macquarie Bank has invested much effort in responding to the problems highlighted by the FCA. An executive has said that the bank has made several changes and upgrades within its organizational structure and has not ruled out future occurrences of such mishaps in its trading division.
However, the FCA pointed out that the fake transactions involved in the scam did not involve any of Macquarie’s customers or the market. The firm’s failure to quickly detect the fraudulent trades proved that it had a significant weakness in monitoring its transactions. The regulator highlighted the need for reporting systems to identify internal risks and detect and prevent them early.
