FCA Fines £642K to Sunrise Brokers for AML Failings

FCA imposed a £642K fine on Sunrise broker for facilitating fraudster trading and having an inadequate anti-money laundering system.

The Financial Conduct Authority (FCA), announced recently that it has imposed a fine of £642,400 on Sunrise Brokers for “serious” crime control associated with cum-ex trading, which are dividend arbitrage and Withholding Tax (WHT) reclaim schemes.

FCA’s investigation concluded that Sunrise Brokers had vulnerabilities in their AML systems for identifying and removing the risk of money laundering and fraudulent trading. This case arose in relation to the business introduced by the Solo Group, between 17 February 2015 and 4 November 2015. This is the second time the FCA has highlighted fraudulent cases of  cum-ex trading. The first FCA case of cum-ex trading was also related to the Solo Group, which was involved in the same fraudulent activities through Sapien Capital. The case came to an end in May 2021 with a fine worth £170,000.

However, the financial watchdog while elaborating the investigation report announced that the brokerage firm failed to identify and mitigate potential financial crime concerns in two instances:

1. It executed a trade on behalf of the customer at almost double the current market worth of the stocks.
2. It accepted payments from the UAE-based client as outstanding debts.

Whereas, in both the cases, the client was introduced by the Solo Group.

Mark Steward, Executive Director of Enforcement and Market Oversight at the FCA said, “Sunrise should not have carried out these self-evidently suspicious trades without proper due diligence. Sunrise’s failings were significant, and the outcome demonstrates that we will not tolerate firms’ lax controls and that we will work with overseas agencies to ensure London is not viewed as a haven for poor controls and practices.”

The Financial Conduct Authority (FCA) continues investigations against the involvement of UK-based brokerage companies in cum-ex trading schemes. More cases are likely to be announced in the near future. Other regulatory bodies including the European Union, are also taking proactive measures in alleviating such criminal schemes.

Meanwhile, the Sunrise Brokers admitted the allegations and consented to resolve issues associated with the Anti-Money Laundering (AML) systems and control.

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