By Aaron Nicodemus, 31 March 2025
Mako Financial Markets Partnership has been fined more than £1.6 million by the UK Financial Conduct Authority (FCA) over allegations that its financial crime prevention programme was ineffective.
In its final notice [1], the FCA highlighted that from 2013–15, Mako facilitated over-the-counter trades on behalf of its client Solo Group that were circular in nature and therefore ‘highly suggestive of financial crime.’
The trades were part of an illegal tax scheme of cum-ex trades in Denmark and Belgium for which several individuals have been convicted, according to the FCA.
Cum-ex trading involves the trading of shares on or just before the last cum-dividend date, the FCA explained. In a suitable jurisdiction, this trading can allow a party to claim a tax rebate on withholding tax, sometimes without entitlement.
Failure to detect
The agency says Mako’s policies and procedures for monitoring potential financial crimes being perpetrated on their network failed to detect the activity.
The firm allegedly facilitated transactions with ‘no obvious rationale’ for Solo Group that caused its controller to lose €2 million, to the benefit of its business associates. Mako also failed to conduct proper due diligence on funds from a United Arab Emirates third party used to pay outstanding debts for Solo Group clients, and failed to properly implement the internal controls it did have in place, the FCA said in its order.
Mako’s compliance manual prohibited the firm from ‘entering any client relationship until identification had been carried out in accordance with its “risk-based approach”’, the order stated.
The compliance manual also prohibited the firm from participating in a transaction ‘without an understanding of its economic context.’ However, the manual provided no guidance on how the ‘economic context’ of the trading was to be assessed, the FCA alleged.
‘Mako failed to spot clear red flags and facilitated highly suspicious trading that made it vulnerable to being used to support financial crime,’ said Therese Chambers, FCA’s Joint Executive Director of Enforcement and Market Oversight, in the FCA press release on the case.[2]
The fine represents the eighth penalty issued by the FCA against UK-based financial services firms for having lax financial crime programmes related to cum-ex trading. The largest such enforcement action was a then £17.2 million fine issued in a June 2023 order [3] against ED&F Man Capital Markets. Notably, the FCA cited a deficient compliance function at ED&F in reaching the penalty.
Mako did not respond to a request for comment.
This article has been republished with permission from Compliance Week, a US-based information service on corporate governance, risk, and compliance. www.complianceweek.com