FCA Slaps Sunrise Brokers with £642,400 Fine for Financial Crime Control Failures

The Financial Conduct Authority (FCA) on Friday has fined Sunrise Brokers LLP £642,400 for serious crime control failings in relation to cum-ex trading, dividend arbitrage and withholding tax (WHT) reclaim schemes.

According to the British financial markets regulator, it found that Sunrise had deficient systems and controls to identify and mitigate the risk of facilitating fraudulent trading and money laundering in relation to business introduced by the Solo Group, between 17 February 2015 and 4 November 2015.

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Throughout the period, the Solo trading was characterised by a circular pattern of purported trades – characteristics which are highly suggestive of financial crime. The trading appears to have been carried out to allow the arranging of withholding tax reclaims in Denmark and Belgium.

In particular, in 2 instances the firm failed to identify or escalate any potential financial crime concerns or suspicions when it should have done, where:

• Sunrise executed a trade on behalf of a broker client, introduced by the Solo Group, at nearly twice the prevailing market price of the stock.

• Sunrise accepted a payment from a UAE-based entity connected to the Solo Group in respect of outstanding debts owed to them by clients of Solo.

"Sunrise should not have carried out these self-evidently suspicious trades without proper due diligence," said Mark Steward, Executive Director of Enforcement and Market Oversight at the FCA. "Sunrise's failings were significant and this outcome demonstrates we will not tolerate firms' lax controls and that we will work with overseas agencies to ensure London is not viewed as a haven for poor controls and practices."

As Sunrise agreed to resolve all issues of fact and liability, it qualified for a 30% discount under the FCA's executive settlement procedures.