Private bank Julius Baer fined £18m over ‘corrupt’ dealings with Yukos Oil
The UK’s financial watchdog has fined private bank Julius Baer more than £18m over its “corrupt” dealings with Russian oil company Yukos Group.
The UK’s Financial Conduct Authority (FCA) today fined Julius Baer’s international business £18,022,500 and sanctioned three of its executives, over the private bank’s use of third-party agents in carrying out business with Yukos Group.
The FCA claimed Julius Baer paid $3m (£2.5m) in fees to a third-party agent, Dmitri Merinson, in return for introducing the bank to companies owned by Yukos Group.
The fees were paid on the understanding Yukos companies would hand large sums of cash over to Julius Baer, through which the private bank could generate significant returns.
Yukos Group later made a series of “uncommercial” foreign exchange transactions with Julius Baer through which the Russian owned companies were charged far higher than standard rates.
The proceeds of these foreign exchange transactions were subsequently shared between Julius Baer and Merinson in the form of commission payments.
Juliuis Baer became aware of the commission payments made to Merinson in 2012, but failed to report those matters to the FCA until 2014, despite suspecting a potential fraud had been committed.
Mark Steward, FCA Executive Director of Enforcement and Market Oversight said: “There were obvious signs that the relationships here were corrupt, which senior individuals saw and ignored.”
“These weaknesses create the circumstances in which financial crime of the most serious kind can flourish.”
The watchdog fined Julius Baer an initial sum of £24,496,700 for failing to conduct its business with integrity, failing to take reasonable care to control its affairs, and failing to be open and cooperative with the FCA.
However, Julius Baer’s decision to settle the FCA’s charges at an early stage, and accept partial liability for the failings, qualified it for an up to 30 per cent discount, that saw the private bank fine lowered to £18m.
The FCA also imposed bans on three of Julius Baer’s former executives, including ex-regional head Gustavo Raitzin, former sub-regional head for Russian and Eastern Europe Thomas Seiler, and ex relationship manager Louise Whitestone.
Julius Baer chief executive David Durlacher said: “We deeply regret the serious failings and apologise for the shortcomings that occurred at JBI between 2009 and 2014.”
“We have taken full responsibility for these historical failings and made complete restitution to our client. Since this wrongdoing took place, we have implemented significant organisational changes.”
“With a reformed governance structure, a new management team and a remodelled risk and compliance function, our clients can trust we will always safeguard their interests.”