The latest from the FCA;
Louise Whitestone, Thomas Seiler and Gustavo Raitzin have referred their Decision Notices to the Upper Tribunal where they will each present their respective cases. The Upper Tribunal will then determine whether to dismiss the respective references or remit them to the FCA with a direction to reconsider and reach a decision in accordance with the findings of the Upper Tribunal. Any findings in the individuals’ Decision Notices and the descriptions of those findings in this press release are therefore provisional and reflect the FCA’s belief as to what occurred and how it considers their behaviour is to be characterised.
Julius Baer International (JBI) has not referred the FCA’s decision to the Upper Tribunal. The JBI Final Notice has not been the subject of any judicial finding. It includes criticisms of Louise Whitestone, Thomas Seiler and Gustavo Raitzin. These individuals have each received Decision Notices in relation to such criticisms. They dispute many of the facts and the characterisation of their actions in the JBI Final Notice, and they have referred their Decision Notices to the Upper Tribunal for determination. The Upper Tribunal will determine whether to dismiss the respective references or remit them to the Authority with a direction to reconsider and reach a decision in accordance with the findings of the Tribunal. The Tribunal’s decision in respect of the individuals’ references will be made public on its website.
The Financial Conduct Authority (FCA) has fined Julius Baer International Limited (JBI), an investment advisory and wealth management firm, £18,022,500 for failing to conduct its business with integrity, failing to take reasonable care to organise and control its affairs and failing to be open and cooperative with the FCA.
The FCA has also decided to ban Gustavo Raitzin, former Regional Head for Bank Julius Baer (BJB), Thomas Seiler, former BJB Sub-Regional (Market) Head for Russia and Eastern Europe and JBI non-executive director, and Louise Whitestone, former relationship manager on JBI’s Russian and Eastern European Desk.
The FCA has concluded that JBI facilitated finder’s arrangements between BJB and an employee of a number of Yukos Group companies, Mr Dimitri Merinson. Under these arrangements, BJB paid finder’s fees to Mr Merinson for introducing Yukos Group companies to Julius Baer. This was done on the understanding that the Yukos Group companies would then place large cash sums with Julius Baer from which Julius Baer could generate significant revenues.
In particular, uncommercial FX transactions were made in which the Yukos Group companies were charged far higher than standard rates, with the profits being shared between Mr Merinson and Julius Baer. Mr Merinson received commission payments totalling approximately USD 3 million as a result of these arrangements.
These fees were improper and together with the uncommercial FX transactions showed a lack of integrity in the way in which JBI was undertaking this business.
Additionally, JBI failed to have adequate policies and procedures in place to identify and manage the risks arising from the relationships between JBI and finders (external third parties that introduced potential clients to Julius Baer in return for commission). This included having no policies which defined the rules surrounding the use of finders within JBI until after June 2010. Policies introduced after that date were inadequate.
Finally, JBI became aware of the nature of these transactions – including the commission payments to Mr Merinson – in 2012 and suspected that a potential fraud had been committed. However, it did not report these matters to the FCA immediately as required or at all until July 2014.
Mark Steward, FCA Executive Director of Enforcement and Market Oversight said:
“There were obvious signs that the relationships here were corrupt, which senior individuals saw and ignored. These weaknesses create the circumstances in which financial crime of the most serious kind can flourish. The FCA’s decisions on the individuals whom the FCA alleges were involved in these failures will now be reviewed in the Upper Tribunal.”
JBI agreed at an early stage to settle all issues of fact and partially agreed liability (but not penalty) and therefore qualified for a 15% to 30% discount under the FCA’s executive settlement procedures. Were it not for this discount the FCA would have imposed a fine of £24,496,700.
This was a challenging investigation which required evidence to be obtained from Switzerland, including interviews. As well, while the investigation was completed before Covid lockdowns, publication of the firm’s Final Notice was prevented by an Order of the Tribunal, which has recently been discharged.
The Upper Tribunal proceedings relating to Thomas Seiler, Louise Whitestone and Gustavo Raitzin’s Decision Notices commenced on 28 November 2022.