The FCA has issued an £18m fine to investment advisory and wealth management firm, Julius Baer International (JBI).

The regulator stated that the firm’s financial penalty is 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.

As well as the fine, FCA has also decided to ban former regional head for Bank Julius Baer (BJB), Gustavo Raitzin, former BJB Sub-Regional (Market) Head for Russia and Eastern Europe, Thomas Seiler, and former relationship manager on JBI’s Russian and Eastern European Desk, Louise Whitestone.

The FCA has concluded that JBI facilitated finder’s arrangements between BJB and an employee of a number of Yukos Group companies, Dimitri Merinson. Under these arrangements, BJB paid finder’s fees to 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, an FCA investigation found that 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. Merinson received commission payments totalling approximately $3m as a result of these arrangements.

The FCA described these fees as “improper” and together with the uncommercial FX transactions “showed a lack of integrity” in the way in which JBI was undertaking this business.

Furthermore, JBI failed to have adequate policies and procedures in place to identify the risks arising from the relationships between JBI and external third parties that introduced potential clients to Julius Baer in return for commission.

JBI became aware of the nature of these transactions – including the commission payments to Merinson – in 2012 and suspected that a potential fraud had been committed. However, it did not report these matters to the FCA until July 2014.

Raitzin, Seiler and Whitestone have since referred their decision notices to the Upper Tribunal where they will each present their respective cases. These Upper Tribunal proceedings commenced on 28 November 2022.

FCA executive director of enforcement and market oversight, Mark Steward, commented: “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.”

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