FCA and PRA have fined Goldman Sachs International a total of £96.1m for risk management failures connected to its role in three fund raising transactions for 1Malaysia Development Berhad, a Malaysian state-owned development company that has been the focus of embezzlement allegations. The fines are part of a global set of actions against the Goldman Sachs ground that have resulted in a US$2.9 billion globally co-ordinated resolution. The transactions the UK fines relate to were approved by global GS Group committees that GSI participated in, and booked to GSI.
Key considerations included:
- the transactions involved clients and counterparties in high risk financial crime jurisdictions; and that
- GSI was aware of the risk that a third party about whom it had concerns would be involved.
The regulators found that GSI had failed to assess and manage risk to the standard that was required given the high risk profile, and also failed to assess risk factors on a sufficiently holistic basis. Added to which, GSI had failed to address bribery allegations in 2013 and failed to manage allegations of misconduct in connection with the client in 2015.
PRA and FCA found GSI had breached a number of Principles (FCA Principles 2 and 3, PRA Fundamental Rule 2) and Rules (in SYSC 9) during the relevant period of 1 February 2012 to 30 May 2013 and then 1 October 2015 to 3 February 2016 in:
- failing to assess with due skill, care and diligence the risk factors that arose in each bond transaction on a sufficiently holistic basis;
- failing to assess and manage the risk of involvement of a third party that GSI had serious concerns about;
- failing to exercise due skill, care and diligence when managing allegations of bribery and misconduct in connection with the client and the transaction; and
- failing to record in sufficient detail the assessment and management of risk associated with the bond transactions.
The fine includes a 30% discount for early settlement.