The UK’s Financial Conduct Authority (FCA) has imposed a £13 million fine on the London branch of Macquarie Bank for “serious failings” that enabled one of its traders to log over 400 fictitious trades over a 20-month period.
Between June 2020 and February 2022, trader Travis Klein manipulated Macquarie’s internal systems to conceal significant trading losses by recording fraudulent transactions. According to the FCA, these activities were facilitated by “significant weaknesses” in the bank’s internal systems and controls, some of which the institution had previously been alerted to but failed to address effectively.
Breaches and Consequences
Klein successfully bypassed three key internal controls, allowing the fictitious trades to go undetected for an extended period. Although the trades did not impact customers or market stability, they cost Macquarie an estimated $57.8 million to unwind.
In addition to fining Macquarie Bank, the FCA has permanently banned Klein from working in the financial services industry for acting dishonestly and lacking integrity. Due to serious financial hardship, Klein avoided further financial penalties.
FCA’s Statement on Internal Risks
Steve Smart, Joint Executive Director of Enforcement and Market Oversight at the FCA, emphasized the importance of robust internal controls to prevent such incidents.
“Macquarie Bank’s ineffective systems and controls allowed one of its employees to hide trading losses that cost the firm millions to resolve,” said Smart. “This case serves as a stark reminder to all regulated entities: risks can emerge from within, and it’s crucial to have robust systems in place to identify and address them early.”
The FCA’s actions underline the importance of compliance, effective risk management, and the need for financial institutions to prioritize the integrity of their operations to maintain market trust.
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