The United Kingdom’s Financial Conduct Authority (FCA) has imposed a penalty of £288,962.53 on Arian Financial for failing to implement adequate systems and controls against financial crime. This failure allowed its services to be exploited in cum-ex trading and withholding tax schemes.
Initially, the regulator imposed a fine of £744,745; however, the Upper Tribunal reduced the amount after Arian challenged it by admitting liability.
Exploiting European Tax Systems
Cum-ex trading, often referred to as the cum-ex dividend scandal, is a controversial and complex tax-related scheme. It involves multiple parties exploiting tax systems in various countries to claim refunds on taxes they never paid. This practice has been particularly prominent in European countries, including Germany, Denmark, and Belgium.
According to the FCA, Arian executed over-the-counter trades amounting to approximately £37 billion and £15 billion in Danish and Belgian equities, respectively, on behalf of the Solo Group’s clients. The FCA-regulated platform received about £546,949 in commission.
However, the regulator pointed out that the trading was “circular,” which is highly suggestive of financial crime. Indeed, the Solo Group reclaimed £899.27 million and £188 million from Danish and Belgian authorities in withholding taxes in 2014 and 2015, respectively. It also received approximately £845.9 million and £42.33 million from the two countries during the same period.
“Arian failed to identify red flags which ought to have been obvious,” said Steve Smart, Joint Executive Director of Enforcement and Market Oversight at the FCA. “The controls the firms we regulate have in place are an important line of defence against our financial system being abused for criminal ends. Arian’s fell short of what we expect.”
FCA Busting Illegal Activities
The FCA highlighted that the actions against Arian were its seventh intervention in a cum-ex trading scheme. Over the years, it has imposed total penalties of £22 million on individuals and entities involved in such schemes.
Last year, the British watchdog fined Nailesh Teraiya, the former controller and CEO of Indigo Global Partners, £5.95 million and banned him from carrying out any regulated activity in connection with similar violations. Other entities that have faced such penalties include Sapien Capital, Sunrise Brokers, TJM Partnership, ED&F Man Capital Markets, and Bastion Capital London.
The United Kingdom’s Financial Conduct Authority (FCA) has imposed a penalty of £288,962.53 on Arian Financial for failing to implement adequate systems and controls against financial crime. This failure allowed its services to be exploited in cum-ex trading and withholding tax schemes.
Initially, the regulator imposed a fine of £744,745; however, the Upper Tribunal reduced the amount after Arian challenged it by admitting liability.
Exploiting European Tax Systems
Cum-ex trading, often referred to as the cum-ex dividend scandal, is a controversial and complex tax-related scheme. It involves multiple parties exploiting tax systems in various countries to claim refunds on taxes they never paid. This practice has been particularly prominent in European countries, including Germany, Denmark, and Belgium.
According to the FCA, Arian executed over-the-counter trades amounting to approximately £37 billion and £15 billion in Danish and Belgian equities, respectively, on behalf of the Solo Group’s clients. The FCA-regulated platform received about £546,949 in commission.
However, the regulator pointed out that the trading was “circular,” which is highly suggestive of financial crime. Indeed, the Solo Group reclaimed £899.27 million and £188 million from Danish and Belgian authorities in withholding taxes in 2014 and 2015, respectively. It also received approximately £845.9 million and £42.33 million from the two countries during the same period.
“Arian failed to identify red flags which ought to have been obvious,” said Steve Smart, Joint Executive Director of Enforcement and Market Oversight at the FCA. “The controls the firms we regulate have in place are an important line of defence against our financial system being abused for criminal ends. Arian’s fell short of what we expect.”
FCA Busting Illegal Activities
The FCA highlighted that the actions against Arian were its seventh intervention in a cum-ex trading scheme. Over the years, it has imposed total penalties of £22 million on individuals and entities involved in such schemes.
Last year, the British watchdog fined Nailesh Teraiya, the former controller and CEO of Indigo Global Partners, £5.95 million and banned him from carrying out any regulated activity in connection with similar violations. Other entities that have faced such penalties include Sapien Capital, Sunrise Brokers, TJM Partnership, ED&F Man Capital Markets, and Bastion Capital London.
This post is originally published on FINANCEMAGNATES.
