FCA Fines Bastion Capital For Serious AML Failings

Richard M. July 14, 2023 4 minute read

The Financial Conduct Authority (FCA) has imposed a fine on Bastion Capital London for serious AML failings in the recent London “cum-ex” crackdown.

The broker is held accountable for trading over £70 billion ($90 billion) worth of Belgian and Danish stocks for hedge fund Solo Group clients.

Over cum-ex trading crimes, FCA rolled out the fifth penalty on Thursday and ordered Bastion Capital to pay £2.45 million for ineffective risk management procedures to detect emerging threats associated with money laundering and fraudulent trading.

Using the cum-ex schemes, the broker also traded the Solo Group’s share among different banks, hedge funds and investors to manipulate stock ownership, resulting in false tax reclaims and exploitation of tax systems across Germany, Denmark and Belgium. However, FCA’s crackdown has resulted in raiding banks, initiating criminal proceedings and litigations.

According to the FCA’s statement, The broker executed shares worth nearly £49 billion in Danish equities and £22.5 billion in Belgian stocks for Solo Group customers between January 2014 and September 2015, making “illegitimate tax reclaims.”

Adding to this, the FCA also said that Bastion Capital failed to spot “clear red flags”, and the broker earned £1.55 million as commission which added a significant proportion of the company’s revenue in the suspected period.

The cum-ex schemes evolved right after the financial crisis 2009 when banks, hedge funds and traders manipulated strategies to trade large amounts of stocks for cash. Other than FCA, the Danish regulatory authorities charged eight UK and US nationals, while the country’s tax regulatory authority SKAT is prosecuting 79 suspects in London for different cases that centre on Solo Capital, a part of Solo Group.

Sanjay Shah, a UK citizen living in Dubai, who founded the Solo group, was deported from the UAE after being fined by the Danish Prosecutors. The regulatory authorities have also ordered him to pay a penalty of $1 billion, but he denies the allegations.

In the liquidation stage, the broker has not disputed the regulatory watchdog’s allegations and cooperated with the investigation. The FCA said the settlements make the FCA a creditor, although other creditors will get precedence over the fine. However, Bastion Capital still needs to reach out for comment. The FCA’s investigation continues.

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