Regulator bans senior executives after the bank’s ”improper” deal with an employee at a bankrupt Russian oil group

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

The regulator concluded that JBI had facilitated finder’s arrangements between Bank Julius Baer and an employee at bankrupt Russian oil group Yukos Group, Dimitri Merinson, aimed at winning business from the Russian conglomerate.

The FCA has also decided to ban Gustavo Raitzin, former regional head for Bank Julius Baer (BJB), Thomas Seiler, former BJB sub-regional (Market) head for Russia and Eastern Europe and JBI non-executive director, and Louise Whitestone, former relationship manager on JBI’s Russian and Eastern European Desk.

Under the arrangement, BJB paid finder’s fees to Merinson for introducing. 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.  

Lacking in integrity

In particular, uncommercial FX transactions were made in which the Yukos Group companies were charged far higher than standard rates, with the profits being shared between Merinson and Julius Baer.

Merinson received commission payments totalling approximately $3m as a result of these arrangements. According to the regulator, the fees were improper and together with the uncommercial FX transactions showed a lack of integrity in the way in which JBI was undertaking this business.

Mark Steward, FCA executive director of Enforcement and Market Oversight said: ”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.”

JBI agreed at an early stage to settle all issues of fact and partially agreed liability (but not penalty) and therefore qualified for a 15% to 30% discount under the FCA’s executive settlement procedures. Were it not for this discount the FCA would have imposed a fine of £25m.

This was a challenging investigation which required evidence to be obtained from Switzerland, including interviews. As well, while the investigation was completed before Covid lockdowns, publication of the firm’s Final Notice was prevented by an Order of the Tribunal, which has recently been discharged.