London (Parliament Politics Magazine) – The Financial Conduct Authority (FCA) fined Macquarie Bank £13m for serious control failures that allowed a junior trader to record over 400 fake trades, costing the bank £46m to resolve.
Macquarie Bank’s London office has been fined £13m by the UK regulator for “serious failings” that permitted a junior trader to execute more than 400 fictitious transactions over a period of 20 months.
According to the Financial Conduct Authority, Travis Klein, who worked at Macquarie Bank’s London metals and bulks trading desk since 2017, used false trades to cover up his trading losses from June 2020 to February 2022.
The FCA highlighted that the fake trades were undetected due to “significant weaknesses” in Macquarie Bank’s systems and controls, some of which had already been informed about. The bank failed to take prompt and effective action despite this prior warning of flaws.
Klein banned by FCA
Klein, a junior trader, successfully bypassed three key internal controls for over 20 months due to the bank’s internal control failure. Regulatory authority FCA has banned him from working in the financial services industry for his dishonesty and lack of integrity.
Initially, the FCA wanted to fine Klein £72,000, but this substantial penalty was waived due to his financial hardship.
FCA’s director Steve Smart warns
The joint executive director of enforcement and market oversight, Steve Smart stated, “This should serve as an example to those we regulate; risk can come from within. You need the right systems to identify it so it can be tackled early.”
Mr. Steve said that weaknesses in Macquarie Bank’s systems and controls allowed an employee to temporarily hide trading losses, costing the company millions to fix the problem.
Bank responds to trading incident
The bank said in a statement, “The unauthorised trading was isolated to one individual. The unauthorised trading did not affect clients, or the market, and no financial benefit or gain was derived by Macquarie or any other party directly from the activity.”
Bank also stated they have taken this issue “very seriously” and added, “We have focused significant resources on addressing learnings from the incident and implemented a series of improvements to our control environment in response to the incident.”
Macquarie Bank operates worldwide and has been authorized by the FCA in London since 2001.
Macquarie would have faced a fine of £18.6m in case of non-cooperation with the financial regulatory authority.
The FCA is also under pressure for reforms in the regulatory authority. FCA has been reported as “incompetent at best, dishonest at worst” in a report by MPs.