Three ex-Julius Baer Group Ltd. bankers won a reprieve from being banned from the UK finance sector over “corrupt” finder’s fees in a ruling that heavily criticized the UK’s financial watchdog for its “highly unsatisfactory” investigation.
(Bloomberg) — Three ex-Julius Baer Group Ltd. bankers won a reprieve from being banned from the UK finance sector over “corrupt” finder’s fees in a ruling that heavily criticized the UK’s financial watchdog for its “highly unsatisfactory” investigation.
The Financial Conduct Authority failed to prove the bankers acted without integrity or had knowledge of the violations, making it “irrational” to ban them, a London tribunal ruled. The judges sent the decision back to the regulator for it to review. They stopped short of lifting the ban wholly, saying the trio showed a “lack of competence” on a number of occasions.
“The authority swallowed hook, line and sinker” what the banker’s manager said in an email, the judges said in the ruling published June 12. The FCA got “anchored in its initial impressions” and “the subsequent disclosures late in the process simply gave rise to a mindset of confirmation bias,” the ruling reads.
The FCA had alleged the three bankers were involved in a more than decade-old arrangement for paying hefty kickbacks as finder’s fees, through inflated foreign currency transactions, to employees in Yukos. The employees at Yukos, once one of Russia’s biggest oil companies, introduced their group companies to the bank in return.
Julius Baer was hit in 2021 with an £18 million ($23 million) penalty by the financial watchdog for enabling improper payments of around $3 million. The bank’s UK unit made regular use of finder’s fees to win new business and almost a third of its revenue came from such introductions by 2012, according to the FCA. In November 2017, Julius Baer International discontinued accepting clients in the UK that were introduced by finders.
“There were obvious signs that the arrangements between Julius Baer and the finder were potentially improper and corrupt,” the FCA said in a statement. “These were serious failings so it was clearly in the public interest for us to examine the conduct of the individuals who were most closely involved.”
The three — a relationship manager and two of her bosses — challenged another 2021 order proposing a lifetime ban, saying they weren’t aware of the wrongdoings. The FCA failed to prove that Louise Whitestone, Gustavo Raitzin, and Thomas Seiler knew the funds were being wrongfully routed to Yukos, according to the verdict.
The tribunal agreed with several of the FCA’s arguments including that suspicious transactions should have been stopped and it has found that the conduct of the bankers was negligent rather than reckless, the FCA said in the statement.
“This has been an incredibly difficult time in Mrs. Whitestone’s life, exacerbated by the excessive delay in this case,” said Subir Desai, a lawyer representing Whitestone. Raitzin didn’t respond to requests for comment while Adam Epstein, Seiler’s lawyer, said he was pleased that the court “dismissed any suggestion that he acted recklessly and without integrity.”
The court chided the FCA for a shoddy investigation that was mired with “exasperating” mistakes.
“There are only so many times that the authority can apologize for its failings, insist that lessons have been learned and then expect that those affected should simply move on,” Judge Timothy Herrington said.
The FCA said that “while human error cannot ever be eliminated completely, we take seriously the tribunal’s recommendations and are reviewing our disclosure processes.”
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