Britain’s financial watchdog has fined Barclays 72 million pounds ($109 million) for cutting corners in vetting wealthy customers in order to win a huge transaction described by one senior manager as potentially the “deal of the century.”

Just over 52 million pounds of the penalty comprised disgorgement, meaning clawing back the profit Barclays made on the transaction. That is the largest disgorgement penalty ever imposed by the FCA.

• The deal’s size meant “very significant” harm could have been done to the integrity of the UK finance system and society if it had been related to criminal activity, the FCA said.

Barclays arranged the 1.9 billion pound transaction in 2011 and 2012 for a number of rich clients deemed by the regulator to be

• politically exposed persons (PEPs), or
• people holding prominent positions that could be open to financial abuse.

The above triggers require a bank to conduct more detailed checks but Barclays failed to do so and in fact cut corners with its compliance procedures, Britain’s Financial Conduct Authority (FCA) said in a damning report on Thursday.

The FCA commented in a 37-page notice on the bank’s failings.

• “Barclays did not follow its standard procedures, preferring instead to take on the clients as quickly as possible and thereby generated 52.3 million pounds in revenue,”

• the bank took unusual steps to keep the details of the clients and the transaction off its computer system, where it would normally be recorded – these included buying a safe specifically for storing some documents relating to the clients and agreeing to pay the clients 37.7 million pounds if their names were ever revealed.

• “Barclays went to significant lengths to accommodate the client to ensure that it won their business,”

• “Barclays’ approach was to request information only if it was absolutely necessary and did not want to ‘irritate’ the clients with multiple requests,”

• several members of Barclays’ senior management were aware of and endorsed the transaction, and said five individuals were identified as giving part approval for it, but it did not name any individuals at fault.

• the bank set up “a select team”, including senior managers, to carry out checks and arrange and execute the deal, which was known by those involved within Barclays as an “elephant deal” because of its size.

• The deal was the largest Barclays had ever executed for wealthy clients and in its early stages one senior manager said it could be “the deal of the century,”

• The bank failed to establish adequately the purpose and nature of the deal and did not sufficiently corroborate the clients’ stated source of wealth and source of funds for the transaction.

• It was a structured finance deal comprising investments in notes backed by underlying warrants and third party bonds. The aim was to deliver a specific rate of income with a full guarantee on the capital over a number of decades.

The regulator listed nine features that should have raised red flags for Barclays, including

• its complex structure involving offshore companies, and
• that at one point clients requested Barclays make a payment of several tens of millions of dollars to a third party, which was not made.