The Financial Conduct Authority has fined investment adviser and wealth manager Julius Baer International Limited (JBI) £18m for failing to conduct its business with integrity, failing to take reasonable care to organise and control its affairs and failing to be open and cooperative with the FCA.
The FCA said there were signs that JBI had a “corrupt” relationship with Russian oil company Yukos.
The regulator has also taken action to ban three individuals working for Julius Baer: Louise Whitestone, Thomas Seiler and Gustavo Raitzin. All three have appealed their Decision Notices to the Upper Tribunal.
JBI has not referred its fine to the Upper Tribunal.
The FCA said it concluded after an investigation that JBI had facilitated “finder’s arrangements” between Bank Julius Baer (BJB) and an employee of a number of Yukos Group companies, Mr Dimitri Merinson. Yukos was a Russian oil company.
Under the arrangements, BJB paid “finder’s fees” to Mr Merinson for introducing Yukos Group companies to Julius Baer. This was done on the understanding that the Yukos Group companies would then place large cash sums with Julius Baer from which Julius Baer could generate significant revenues, the FCA said.
Uncommercial FX transactions were made in which the Yukos Group companies were charged far higher than standard rates, with the profits being shared between Mr Merinson and Julius Baer. Mr Merinson received commission payments totalling approximately £2.5m as a result of the arrangements.
The FCA said the fees were “improper” and, together with the uncommercial FX transactions, showed a lack of integrity in the way in which JBI operated.
JBI also failed to have adequate policies and procedures in place to identify and manage the risks arising from the relationships between JBI and finders, the FCA said.
JBI became aware of the nature of the transactions – including the commission payments – in 2012 and suspected that a potential fraud had been committed. However, it did not report these matters to the FCA immediately as required or at all until July 2014.
Gustavo Raitzin was former regional head for Bank Julius Baer (BJB); Thomas Seiler was former BJB sub-regional (market) head for Russia and Eastern Europe and a JBI non-executive director and Louise Whitestone was former relationship manager on JBI’s Russian and Eastern European Desk.
The three dispute many of the facts of the case and the Upper Tribunal will now consider their appeals. Until this is completed the FCA said that any Decision Notices on them were provisional.
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 investigation into Julius Baer was completed before the Covid lockdown but a challenging investigation, which required evidence to be obtained from Switzerland, delayed publication of the Final Notice.
In a statement today David Durlacher, CEO of Julius Baer International, 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. JBI continues to move from strength-to-strength in the UK as we continue to grow. We are focused on building our capabilities to provide our clients with the specialist, bespoke services they need and value.”
