Financial Conduct Authority
AML - FCA fines Sunrise Brokers LLP - 12 November 2021
The FCA has issued a final notice to interdealer broker Sunrise Brokers LLP (Sunrise) fining it £642,000 for failings in relation to its anti-money laundering systems and controls, which led to the risk of it being used to facilitate fraudulent trading and money laundering in relation to cum-ex trading. Cum-ex trading is share trading carried out just before the last cum-dividend date. In certain jurisdictions this can allow a party to claim a tax rebate on withholding tax to which it is not entitled.
The FCA found that between February and November 2015, Sunrise breached:
- FCA Principle 3 as it had inadequate systems and controls to identify and mitigate the risk of being used to facilitate fraudulent trading and money laundering in relation to business introduced by four authorised entities known as the Solo Group; and
- FCA Principle 2 as it did not exercise due skill, care and diligence in applying its anti-money laundering policies and procedures. It failed to properly assess, monitor and mitigate the risk of financial crime in relation to the Solo Group’s clients and the purported trading.
The FCA found that the Solo Group’s trading was characterised by a pattern of extremely high value OTC equity trading, back-to-back securities lending and forward transactions involving EU equities, on or around the last cum-dividend date. Following the purported cum-dividend trading that took place on designated dates, the same trades were subsequently reversed over several days or weeks to neutralise the apparent shareholding positions. The trading appears to have been carried out to allow the arranging of withholding tax (WHT) reclaim schemes in Denmark and Belgium.
During the relevant period, on behalf of the Solo Group clients Sunrise executed purported over the counter (OTC) equity cum-dividend trades to the value of approximately £25.4 billion in Danish equities and £11.2 billion in Belgian equities. It received commission of £466,652.
The FCA states that this is the second case concerning cum-ex trading, with both cases involving the Solo Group. The first case was against Sapien Capital Limited, previously covered in this Bulletin.
Final Notice: Sunrise Brokers LLP