The Financial Conduct Authority (FCA) has fined Mako Financial Markets Partnership LLP (Mako) £1,662,700 for significant failures in its financial crime controls. The regulator found that Mako lacked effective systems and controls to prevent financial crime and failed to adequately apply its existing policies and procedures.
This marks the eighth enforcement case brought by the FCA as part of its broader investigations into cum-ex trading. In collaboration with EU and global law enforcement agencies, the FCA has now imposed fines exceeding £30 million related to this type of trading.
What happened?
Between December 2013 and November 2015, Mako executed purported over-the-counter (OTC) equity trades on behalf of clients from the Solo Group. These trades involved approximately £68.6 billion in Danish equities and £23.6 billion in Belgian equities. For facilitating these trades, Mako earned a commission of approximately £1.45 million.
However, the trading was circular in nature—a red flag for financial crime. The FCA has indicated that these transactions were likely designed to arrange withholding tax (WHT) reclaims in Denmark and Belgium. Several individuals have already been convicted in Denmark as part of this scheme.
Additional failings
Beyond cum-ex trading, Mako also failed to identify other red flags related to its business dealings with the Solo Group. Notably, it facilitated transactions that lacked an obvious economic rationale, including a deal that resulted in a €2 million loss for the Solo Group’s controller while benefiting his associates.
Additionally, Mako received payments from a UAE-based third party linked to the Solo Group to cover outstanding debts owed by Solo Group’s clients. Mako did not conduct due diligence on these payments, which created a heightened risk of money laundering. The FCA also found that Mako’s internal controls were insufficient to detect and mitigate potential financial crime risks. Specifically:
- The firm failed to properly scrutinise high-risk clients and transactions.
- Mako’s monitoring systems did not effectively flag suspicious trading patterns.
- Compliance policies were not adequately enforced, leading to a culture of weak oversight.
These shortcomings meant that Mako was exposed to financial crime risks, ultimately leading to regulatory action.
FCA’s response
Therese Chambers, Joint Executive Director of Enforcement and Market Oversight at the FCA, stated:
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.
As Mako accepted the FCA’s findings and agreed to settle, it received a 30% discount on its fine under the FCA’s settlement discount scheme.
How Neopay can help
Cases like Mako’s demonstrate the importance of robust compliance frameworks, effective due diligence, and proactive monitoring to prevent financial crime. Neopay specialises in helping firms strengthen their financial crime prevention measures and maintain compliance with FCA regulations.
Our services include:
- Compliance audits and reviews: Ensuring your systems and controls are effective and aligned with regulatory expectations.
- Risk Assessments and Due Diligence: Identifying potential vulnerabilities before they become regulatory issues.
- Training and staff awareness: Providing engaging and practical compliance training to ensure teams recognise red flags.
- Ongoing compliance support: Helping firms build and maintain compliance frameworks that prevent financial crime.
With regulatory scrutiny increasing, businesses must act proactively to protect themselves and maintain the integrity of the UK financial market. Contact Neopay today to discuss how we can support your compliance efforts.
