Bastion Capital London Limited has been fined £2.45m by the Financial Conduct Authority
(FCA) for serious financial crime control failings in relation to cum-ex trading.

The FCA have found that the firm, which is now in liquidation, failed to manage the risk of being used to facilitate fraudulent trading and money laundering.

This is the fifth case brought by the FCA in relation to cum-ex trading and is part of a range of measures taken by the FA in connection with cum-ex dividend arbitrage cases and WHT schemes.

The regulator has involved proactive engagement with global law enforcement authorities, imposing fines on over £20m on firms which earned over £7m in fees from this trading.

Between January 2014 and September 2015, Bastion executed trading to the value of approximately £49bn in Danish equities and £22.5bn in Belgian equities on behalf of Solo Group clients. These purported trades were carried out in a way that was highly suggestive of financial crime.

The trading in question appears to have been carried out to allow the arranging of withholding tax reclaims in Denmark and Belgium, with Bastion receiving a commission of £1.55m, which was a significant proportion of the firm’s revenue during this time.

Furthermore, Bastion executed a series of trades on behalf of 11 Solo clients on four days. The FCA found that opposite positions were then executed by the same clients within hours at significantly different prices. This resulted in a loss of €22.7m for Ganymede Cayman Ltd, an entity wholly owned by the Solo Group’s controller, to the benefit of the remaining 10 Solo clients.

The FCA found that Bastion ignored or failed to notice a series of red flags in relation to these trades, which had no apparent economic purpose expect to transfer funds from the Solo Group’s controller to his business associates. The regulator has said that Bastion should have considered financial crime risks when onboarding the Solo clients and when executing the trading.

Joint executive director of enforcement and market oversight at the FCA, Steve Smart, said: "Bastion earned significant fees from executing trades on behalf of Solo Group which were ultimately for the purpose of making illegitimate tax reclaims from the Danish and Belgian exchequers. They failed to spot clear red flags which should have alerted them to the risk of being used for financial crime. Firms need to properly manage these risks."

By not disputing the FCA’s findings and agreeing to settle, Bastion qualified for a 30% discount under the FCA’s settlement discount scheme.

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