Barclays’ risk officer in France alleges money laundering and mis-selling failures, reports Financial Times

Just 8 days ago I published a posted on "What keeps MLROs awake at night? 5 things which keeps a MLRO up at night". It's been viewed nearly 1,400 times, received 76 likes and 13 comments. One Chief Risk Officer has no doubt had many sleepless nights judging by today's article in the Financial Times about money laundering allegations contained in a letter from Philippe Hébert, Chief Risk Officer of Barclays France.  The FT reports that Phillipe Hebert said that he was “determined to quit the company”. The full article (which is copyright of the Financial ) repeated below with some personal observations.

A senior executive at Barclays has alleged money laundering and mis-selling failures at the bank’s French operations, casting a shadow over the British group’s plan to sell its business in France to a private equity group.

The Financial Times has seen a letter dated April 5 from Philippe Hébert, chief risk officer of Barclays France, to Tony Blanco, chief executive of Barclays France, alleging serious shortfalls in the bank’s standards of controls, compliance and conduct.

Mr Hébert says: “I am following up the message I sent you on March 3, regarding serious mismanagement at cashier level and the particularly poor handling of this situation by the various control services and lines of defence, even though it carries serious risks of money laundering, especially at branches already known to be at risk (such as Biarritz).” [ Oakes; Do we assume that the CRO did not receive a response from the CEO for at least a month?  If so, is this indicative of points 2 and 5 in the 'What keeps MLROs awake at night? " post? i.e. # (2) Compliance is now very much at the forefront in banking, but there are still firms that are reluctant to spend the necessary amount on compliance and AML. A lack of quality resources can add pressure to the MLRO’s workload and #(5) Effective reporting between board, business and compliance is a key; however, many firms either have too many systems that do not provide effective reporting]

The letter cites several cases of suspicious activity that Mr Hébert claims the bank has failed to take seriously enough. These include unusually high levels of repeated, large cash withdrawals by customers of just below the €10,000 limit at its Biarritz branch — on 38 occasions by one client — and the detention of staff in its Nantes branch by police on suspicion of money laundering. [Oakes: #2 and #5 again?]

Mr Hébert said elderly customers of Barclays France had regularly been mis-sold expensive products. He gives the example of a 97-year-old who was advised to put all his money into one of its Spirimmo life insurance products charging a 6 per cent annual fee. The bank paid €60,000 to settle a complaint by the client’s son, but no disciplinary action was taken against the staff responsible, Mr Hébert said.

The allegations are a blow to Barclays, which said last week it had entered exclusive talks to sell its French retail, wealth management and life insurance business to AnaCap Financial Partners, a UK-based private equity investor. The price to be paid for the operations, which includes 74 branches and about 1,000 staff, was not disclosed.

Mr Hébert’s warning about failings in its French operations came less than five months after Barclays was hit with a £72m record fine from the UK’s Financial Conduct Authority for lax anti-money-laundering controls around ultra-wealthy Qatari clients.

Barclays said in a statement: “We were already aware of these allegations. We are satisfied that the concerns were already identified and under investigation and action being taken in accordance with our standard processes. All relevant parties are aware.” [Oakes: "We are satisfied that the concerns were already identified and under investigation and action being taken in accordance with our standard processes" [my underlining].  I wonder if this 'standard process' includes engagement with the CRO?  Why did he feel the need to write on 5 April to follow up on his letter of 3 March?  Did he feel that matters were not progressing fast enough?]

Two people familiar with the letter said AnaCap had been made aware of its contents and continued to pursue talks to buy the business. AnaCap declined to comment.

Mr Hébert, who did not respond to requests for comment, said in his letter that he would not feel comfortable reporting his findings to the groups doing due diligence on an acquisition of Barclays France and to the regulators. “To avoid being put in such a situation”, he said he was “determined to quit the company” under the same leaving conditions offered to other senior executives. [Oakes:  See #1 The regulations allow for a two year jail sentence to be imposed on an MLRO if the firm is found to be negligent in its anti-money laundering (AML) procedures and #4 In branches of foreign banks the MLRO can wear many hats. This affects the time available to spend on financial crime issues and quality may be compromised.  Of course any senior governance, risk or compliance officer reportedly saying that “To avoid being put in such a situation” one is “determined to quit the company” is a matter of concern for the individual, the employer and regulator and needs to be considered more fully].

In his letter, he said that some clients withdrawing large sums of cash from its Biarritz branch were political opponents of countries under sanctions and in one case a member of a foreign royal family who had not been classified as a politically exposed person. He also alleged “African money laundering on a grand scale” at its Champs Elysées branch involving government officials as well as “internal fraud”.

He wrote: “Concerning anti-money laundering, the situation seems very different to the recent and favourable report of BIA [Barclays Internal Audit], a report that I obtained despite not being sent it, in contravention of governance rules.” [Oakes: Ouch! Presumably the French and UK regulators will be reviewing this matter carefully?]


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