The Financial Conduct Authority has fined wealth manager Julius Baer International £18m and imposed a ban on three former senior executives over "corrupt" relationships between the firm and a Russian oil giant.
The UK's regulation watchdog said Julius Baer had failed to "conduct its business with integrity, failing to take responsible care to organise and control its affairs and failing to be open and cooperative with the FCA".
The three senior executives are Gustavo Raitzin, former regional head , Thomas Seiler, former sub-regional head for Russia and Eastern Europe and non-executive director, and Louise Whitestone, former relationship manager on the bank's Russian and Eastern European desk.
According to the regulator, Julius Baer International facilitated finder's arrangements between Bank Julius Baer and Dimitri Merinson, an employee of Russian oil and gas conglomerate Yukos Group.
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Under these agreements, Merinson received finder's fees from Bank Julius Baer in exchange for referring Yukos Group companies to Julius Baer. This was done on the understanding that these companies would later deposit substantial sums of cash with Julius Baer, from which it would reap sizable revenues.
In particular, uncommercial FX transactions were conducted in which the Yukos Group companies were charged rates that were far higher than standard, with Merinson and Julius Baer splitting the gains. As a result, Merinson received commission payments totalling about $3m.
"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," the FCA said.
Mark Steward, executive director of enforcement and market oversight at the FCA, noted there were "obvious signs" the relationships 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," he said.
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Julius Baer also failed to have adequate policies and procedures in place to manage the risks arising from relationships between the firm and the external third parties that introduced potential clients to the firm in return for a commission.
Despite being aware of the nature of these transactions in 2012 and suspecting that a potential fraud had been committed, Julius Baer did not report this to the FCA until July 2014.
Julius Baer International agreed at an early stage to settle all issues of fact and partially agreed liability, but not penalty, and qualified for a 15% to 30% discount under the FCA's executive settlement procedures. Without this discount, the regulator would have imposed a fine of over £24.5m.
