FCA Fines Mako £1.66M for Failing to Prevent Financial Crime

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Mako Financial Markets Partnership LLP has been fined £1,662,700 by the Financial Conduct Authority (FCA) for failing to establish effective controls to prevent financial crime.

The FCA found that between December 2013 and November 2015, Mako facilitated highly suspicious trades worth £68.6 billion in Danish equities and £23.6 billion in Belgian equities on behalf of clients linked to the Solo Group.

These trades, which appeared circular, were allegedly designed to enable fraudulent withholding tax (WHT) reclaims. Mako earned £1.45 million in commission from these transactions, despite the presence of multiple red flags.

The FCA’s investigation determined that Mako’s failure to apply proper scrutiny made it vulnerable to financial crime.

The firm did not adequately assess the legitimacy of the Solo Group’s activities, including a series of questionable transactions that lacked economic rationale.

One such transaction resulted in a €2 million loss for the Solo Group’s controller, while benefiting his business associates.

Additionally, Mako accepted payments from a UAE-based third party to settle debts owed by Solo Group clients without conducting due diligence, increasing the risk of money laundering.

Therese Chambers, the FCA’s joint executive director of enforcement and market oversight, emphasized the importance of financial firms maintaining robust anti-crime controls.

She criticized Mako for failing to recognize clear signs of misconduct, stating that such lapses undermine trust in UK financial markets.

Chambers reaffirmed the FCA’s commitment to ensuring a fair and transparent financial system, stressing that firms must be proactive in identifying and mitigating financial crime risks.

Mako’s fine is the latest in a series of penalties imposed by the FCA in connection with cum-ex trading, a controversial practice that has been at the center of international tax fraud investigations.

This case marks the conclusion of the regulator’s enforcement actions related to cum-ex, with total fines now exceeding £30 million. Several individuals have already been convicted in Denmark for their roles in similar schemes.

Given Mako’s cooperation with the investigation and its agreement to settle, the firm received a 30% reduction on its fine under the FCA’s settlement discount scheme.

The case serves as a warning to financial institutions that fail to implement adequate safeguards against illicit trading practices.