November 12, 2021

Global brokerage fined over £600,000 for anti-money laundering failures

The  UK Financial Conduct Authority has imposed a financial penalty of £642,400 on Sunrise Brokers LLP, an interdealer broker and global derivatives specialist, after finding that the company failed to identify or escalate suspicions of financial crime in connection with transactions on behalf of the Solo Group, in violation of Principles 2 and 3 of the FCA’s Principles for Businesses

Specifically, the FCA found that between February and November of 2015, Sunrise accepted payment from a UAE-based entity to pay for debt owed by clients of the Solo Group, without performing adequate due diligence.  Likewise, the FCA found that Sunrise executed an overpriced stock trade on behalf of a client associated with the Solo Group, without identifying or escalating the potential financial crime concerns occasioned by the transaction.  The FCA found that Sunrise had not known Solo’s clients previously, and that the clients were offshore entities controlled by a small group of individuals without apparent access to sufficient funds to settle the transactions.  This led the FCA to conclude that Sunrise had failed to apply adequately the relevant anti-money laundering policies and procedures with regard to clients introduced by the Solo Group, and that Sunrise had allowed these clients to obtain Dividend Credit Advice Slips and use these to make Withholding Tax reclaims in Denmark and Belgium.

The FCA referred to the manner in which trading for the purported Solo entities was conducted as “highly suggestive of financial crime,” particularly when the scale and volume of the trades is taken into consideration. It found that Sunrise had breached Principle 3 of the Principles for Businesses by failing to provide adequate guidance for onboarding clients and carrying out risk assessments, by failing to set out adequate processes or procedures for conducting enhanced due diligence and monitoring, and by failing to establish escalation procedures for identifying, managing and documenting financial crime and anti-money laundering risks.  The FCA found, furthermore, that Sunrise had not complied with Principle 2 in that it failed to address identified compliance deficiencies promptly, failed to carry out adequate customer due diligence when onboarding 142 Solo clients, failed to conduct ongoing transaction monitoring, and failed to recognize red flags pointing to insufficient liquidity in connection with the Solo trades.

The FCA concluded that Sunrise’s failings exposed the organization to unacceptable financial crime risk, and that a significant financial penalty was warranted.  At the same time, it acknowledged Sunrise’s agreement to resolve the matter, granting a 30% (stage 1) discount pursuant to the FCA’s executive settlement procedures.

The Sunrise matter is the second case brought by the FCA in connection with cum-ex trading.  The investigation is ongoing.

FCA press release | Final Notice