The FCA imposed a £1.7 million fine on London-based trading firm Mako for its involvement in cum-ex trading strategies. These strategies exploited legal loopholes to enable multiple tax rebate claims on dividend payments, leading to substantial tax revenue losses across various jurisdictions. Between 2008 and 2010, Mako facilitated approximately £92 billion in Danish and Belgian equities trades for clients associated with the Solo Group hedge fund. Notably, Sanjay Shah, founder of Solo Group, was sentenced to 12 years in prison in Denmark for orchestrating a tax fraud scheme amounting to around £1 billion. This action marks the FCA’s eighth enforcement case related to cum-ex trading, concluding its investigation into such practices with total fines exceeding £30 million. Mako did not contest the FCA’s findings and agreed to settle, resulting in a 30% reduction of the original fine. The firm had ceased the relevant business operations nearly a decade ago and now focuses solely on proprietary trading. FCA Urges Brokers to Strengthen AML Measures
On January 24, 2025, the FCA issued a call to wholesale brokers to enhance their AML safeguards. A recent review revealed that many firms underestimated their exposure to money laundering risks, overly relied on other parties in the transaction chain for due diligence, and lacked sufficient information sharing. The FCA emphasized the necessity for firms to regularly assess and improve their controls to effectively combat financial crime.
Lessons Learned
- Robust Compliance Programs Are Essential: The FCA’s enforcement actions highlight the critical need for firms to establish and maintain comprehensive compliance frameworks that can effectively identify and mitigate financial crime risks.
- Continuous Risk Assessment: Financial institutions must regularly evaluate their exposure to evolving money laundering tactics and adjust their AML strategies accordingly to remain effective.
- Shared Responsibility in Due Diligence: Relying solely on other entities in the transaction chain for due diligence is insufficient. Firms should implement their own rigorous verification processes to ensure compliance.
- Proactive Engagement with Regulators: Cooperating with regulatory bodies and promptly addressing identified shortcomings can lead to more favorable outcomes, including potential reductions in penalties.
These developments serve as a reminder of the FCA’s dedication to upholding the integrity of the UK’s financial system and the importance for firms to actively participate in the fight against financial crime.