CACEIS UK, an asset servicing bank, has been censured by the Financial Conduct Authority (FCA) and will make a voluntary payment of £31.7m to clients of WealthTek for failures in its financial crime controls. The regulator found that CACEIS UK did not act on information indicating that WealthTek was not authorised to hold certain client assets or client money, leaving clients exposed to the risk of financial crime.
The FCA stated that, in just over a year, it has now secured more than £57m in total for WealthTek clients through actions involving CACEIS UK, Sapia Partners and Barclays Bank UK. CACEIS UK became WealthTek's sub-custodian in November 2020, at a time when WealthTek was known as Vertus Asset Management LLP. As sub-custodian, CACEIS UK was responsible for safeguarding WealthTek clients' assets.
Failures in authorisation checks and monitoring
On three occasions, CACEIS UK checked the Financial Services Register and saw that WealthTek was not authorised to hold certain client assets. Despite this, the firm did not take sufficient action in response to these findings. CACEIS UK also failed to identify that WealthTek was not permitted to hold client money.
Nevertheless, CACEIS UK opened client accounts for WealthTek to use and then did not monitor these accounts adequately. The firm failed to promptly review and resolve alerts raised by its systems in relation to these accounts, which contributed to the heightened risk to clients.
Regulatory response and financial outcome
According to the FCA, the voluntary payment of £31,714,068 will be distributed to WealthTek clients who have not been able to reclaim their money in full. The regulator concluded its investigation into CACEIS UK in 13 months.
Therese Chambers, joint executive director of enforcement and market oversight at the FCA, said that strong financial crime controls are essential to keeping clients' assets safe and that CACEIS UK's failures exposed clients to serious risk. She added that the firm provided extensive co-operation and agreed to a substantial voluntary payment, and that the FCA decided not to impose a fine as a result.
The FCA noted that, had it not been for CACEIS UK's co-operation and its agreement to make the voluntary ex-gratia payment for the benefit of WealthTek's clients, it would have imposed a financial penalty of £23,091,000, after applying a 30% discount for settling the matter.
