The Financial Conduct Authority (FCA) of the UK has imposed a penalty of £288,962.53 on Arian Financial LLP due to shortcomings in their financial crime prevention systems and controls. This fine is a result of the company’s failure to establish robust safeguards against potential financial misconduct, which put them in a position susceptible to fraudulent trading and laundering activities related to their clients from the Solo Group.
This case marks the seventh instance of enforcement action related to cum-ex trading and schemes involving withholding taxes. The FCA’s ongoing efforts have involved cooperation with both European and global law enforcement agencies, and collectively, fines exceeding £22 million have been sanctioned for similar violations.
Arian Financial executed large-scale over-the-counter equity transactions totaling around £37 billion and £15 billion in Danish and Belgian equities. The company collected approximately £546,949 in commissions from these activities. Throughout the trading period, the nature of the transactions raised significant red flags, indicating potential financial wrongdoings, particularly in facilitating withholding tax reclaim arrangements in Denmark and Belgium.
The Solo Group made substantial withholding tax claims to Danish and Belgian authorities in 2014 and 2015, amounting to £899.27 million and £188 million, respectively. The majority of these claims resulted in significant reimbursements, with approximately £845.90 million and £42.33 million received.
Despite acknowledging their liability in the matter, Arian Financial referred the FCA’s proposed fine to the Upper Tribunal. The Tribunal subsequently reduced the original fine amount from £744,745 to £288,962.53.
While the Tribunal concurred with the FCA’s conclusions regarding the severity of the violations and the imperative of imposing a penalty, it opted to lessen the fine. This decision stemmed from the consideration that the financial gain received by Arian should be calculated after taking into account certain fees paid to Solo Group and the broker involved in the trades. Therefore, the reduced fine reflects both the recognized misconduct and the specific context of financial benefits in this situation.