FCA Censures CACEIS UK Over WealthTek Failures, Secures £31.7 Million for Clients

Key Takeaways

• CACEIS UK Censured Over Control Failures: The FCA publicly censured CACEIS UK after finding the bank failed to act on repeated warning signs and maintain effective financial crime controls while serving as WealthTek's sub-custodian.
• £31.7 Million to Be Returned to Clients: Instead of imposing a £23.1 million fine, the FCA accepted CACEIS UK's agreement to make a voluntary £31.7 million payment to compensate WealthTek clients who remain out of pocket.
• Repeated Missed Opportunities to Intervene: The regulator found CACEIS UK failed to respond adequately after discovering WealthTek lacked authorization to hold certain client assets and client money, while also failing to promptly investigate monitoring alerts.

Deep Dive

Three times, CACEIS UK checked the Financial Services Register. Three times, it was presented with information showing that WealthTek lacked permission to hold certain client assets. Nothing happened that altered the course of the relationship. According to an enforcement action the UK's Financial Conduct Authority published Thursday, concluding that the asset servicing bank failed to respond appropriately to repeated warning signs while acting as WealthTek's sub-custodian.

Rather than imposing a financial penalty, the regulator publicly censured CACEIS UK after the bank agreed to make a voluntary payment of £31.7 million to clients who have been unable to recover their losses in full. The FCA said it would otherwise have imposed a financial penalty of £23.1 million, reduced by 30% for settlement. Instead, it accepted the larger voluntary payment, citing CACEIS UK's extensive cooperation throughout the investigation.

The case reaches back to November 2020, when CACEIS UK became sub-custodian to WealthTek, then operating as Vertus Asset Management LLP. In that role, the bank was responsible for safeguarding client assets.

According to the regulator, the failures extended beyond missed regulatory permissions. CACEIS UK also failed to recognize that WealthTek was not authorized to hold client money before opening accounts that WealthTek would go on to use. Once those accounts were established, the bank's monitoring controls fell short again. Internal systems generated alerts, but those alerts were not reviewed and resolved promptly, leaving accounts exposed to financial crime risk for longer than they should have been.

The FCA's findings are notable less for alleging sophisticated misconduct than for describing a chain of ordinary decisions that never quite reached the point of intervention. The information was available. The controls existed. What failed was the follow-through.

"Strong financial crime controls keep clients' assets safe," said Therese Chambers, the FCA's joint executive director of enforcement and market oversight. "CACEIS UK's failures exposed clients to serious risk."

She said the regulator chose not to impose a fine because the bank had cooperated extensively with the investigation and agreed to make what she described as a substantial voluntary payment.

The £31.7 million payment will be distributed to WealthTek clients who remain out of pocket following the firm's collapse. Approximately £30.9 million will be paid to WealthTek's administrators, while £800,000 will be directed to the Financial Services Compensation Scheme. After completing any additional recovery actions, the FSCS will distribute any remaining surplus to eligible clients in accordance with FCA rules.

The GRC Report is your premier destination for the latest in governance, risk, and compliance news. As your reliable source for comprehensive coverage, we ensure you stay informed and ready to navigate the dynamic landscape of GRC. Beyond being a news source, the GRC Report represents a thriving community of professionals who, like you, are dedicated to GRC excellence. Explore our insightful articles and breaking news, and actively participate in the conversation to enhance your GRC journey.