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Thought Leadership

Financial Crime Summary: April 2021 (Q1)

Laven regularly reports on the most interesting and relevant financial crime news to give an idea of the ongoing regulatory approach taken against money laundering and terrorist financing.

Posted on 22 Apr 2021

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FCA Commences Criminal Proceedings against Brothers for Insider Dealing and Fraud

The FCA has commenced criminal proceedings against brothers, Mohammed Zina and Suhail Zina, one who worked as a Goldman Sachs analyst, the other as a lawyer at magic circle law firm Clifford Chance. The proceedings relate to six offences of insider dealing and three offences of fraud by false representation. The alleged profit made from these offences was £142,000.

The offences allegedly took place between July 2016 and December 2017 and involved trading in ARM Holdings, Alternative Networks, Punch Taverns, Shawbrook, HSN, and Snyder’s Lance. The fraud charges relate to three personal loans obtained from Tesco Bank by the brothers; the total of these three loans came to £95,000. The loans were supposed to be used for funding home improvements. Instead, the loans funded the alleged insider dealing.

Goldman Sachs commented that protection of confidential client information is of ‘paramount importance’ and went on to say that ‘Neither the firm nor any other current or former employee of the firm is the subject of an investigation into the matters giving rise to proceedings.’ Clifford Chance said that Suhail Zina left in 2018 and declined any further comment.

Mohammed and Suhail Zina appeared at Southwark Crown Court on the 16th of March for their plea and trial preparation. A trial date has now been set for 4 April 2022.

FCA Starts Criminal Proceedings Against NatWest Plc

The FCA announced in March that it is commencing with criminal proceedings against National Westminster Bank Plc ("NatWest"). The FCA claims that Natwest failed to adhere to regulations 8(1), 8(3) and 14(1) of MLR 2007. These regulations require firms to determine, conduct and demonstrate risk-sensitive due diligence and ongoing monitoring of their relationships with their customers.

The case arises from the poor handling of funds deposited into accounts operated by a UK incorporated customer of Natwest. It was seen that increasingly large cash deposits were being made into customer’s accounts with insufficient systems and controls to monitor this activity. It is alleged that around £365 million was paid into the customer’s accounts, of which around £264 million was in cash.

This is the first criminal prosecution under the MLR 2007 by the FCA and the first prosecution under the MLR against a bank. Natwest was due to appear at Westminster Magistrates’ Court on 14 April 2021 however, the proceedings were adjourned to give the bank more time to review the evidence that the FCA has gathered against it. No individuals are being charged as part of these proceedings.

FCA Fines and Prohibits Trader for Market Abuse

The FCA has fined Mr Adrian Geoffrey Horn £52,500 for market abuse and prohibited him from performing any functions concerning regulated activity. Mr Horn was formerly a market-making trader at Stifel Nicolaus Europe Limited (“Stifel”).

The FCA found that Mr Horn, engaged in market abuse by executing trades with himself in the share McKay Securities Plc (“McKay”). The practice is known as ‘wash trading’ and involved Mr Horn intentionally placing buy orders in McKay shares that traded with his existing sell orders. Mr Horn executed 129 wash trades during the period 18 July 2018 to 22 May 2019. McKay was a corporate client of Stifel. Mr Horn’s intention for executing these trades was to ensure that a minimum number of shares were traded in McKay each day, he believed that this was a requirement to ensure that McKay remained in the FTSE All-Share Index. Mr Horn thought that if McKay were to remain in the FTSE All-Share Index it would benefit the relationship between Stifel and its client.

Mr Horn gave false and misleading signals to the market as to the demand for McKay shares. As a result, other market participants were seeing what they thought to be legitimate trades in McKay occurring. Further, the wash trades artificially inflated end of day trading volumes. Despite Mr Horn being aware of the risks associated with his actions, he recklessly went ahead with them anyway.

Mark Steward, Executive Director of Enforcement and Market Oversight, said that: ‘Wash trading is a form of manipulation which undermines market efficiency and integrity’ and that the FCA will take ‘robust action against such abuse’.

Mr Horn demonstrated a high level of co-operation during the investigation. As a result, Mr Horn’s financial penalty was reduced by 25%. In addition, Mr Horn received a further 30% settlement discount. The FCA considers that the fine and the prohibition imposed to reflect the serious nature of the breach.


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