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Culture & Regulatory Compliance: FCA seeks to ban former Barclays COO

14th September 2016

Culture Cover-up:

In January 2013 there were various reports in the media in relation to allegations about a top executive at Barclays destroying a damning internal report about serious deficiencies in the Bank’s corporate culture.

Today, the FCA has published their Decision Notice in relation to this case, however further review by the Upper Tribunal awaits before any final punishments are decided.

The COO’s Responsibilities:

The top executive in the hot seat is Mr Andrew Tinney, formerly the Global Chief Operating Officer of Barclays Wealth and Investment Management - a division of Barclays Bank Plc.

Within the Barclay’s Wealth Division Mr Tinney’s role included responsibility and oversight for:

• Compliance;
• Operations;
• Infrastructure activities;
• Global technology; and
• Joint responsibility for the Legal Function.

Thus, he had been an Approved Person and had been registered with the FCA to carry out CF29 - the Significant Management function. He was therefore required to comply with the FCA’s Statements of Principle, including that he act with integrity in carrying out his controlled function.

Compliance Culture Audit:

In particular, Mr Tinney had been given the responsibility for overseeing a remediation program within Barclays. The purpose of this, the FCA informs, was to “correct certain regulatory deficiencies identified by the SEC during an examination of the US branch.”

The remediation program included a ‘Culture Audit’ – something that we are informed Mr Tinney initiated and personally communicated to the US regulator and the aim of which was to seek to identify the Bank’s deficiencies and the root causes for remedy.

Included as part of the audit was the appointment of an outside consultancy firm to examine the ‘tone from the top’ – in essence the culture of the firm as set by management and how this flowed down and influenced the Wealth Management Division.

Finding & Recommendations:

The final report for the Culture Audit was delivered by the consultancy to Mr Tinney in March 2012 and included various statements and quotes from interviews of the Bank’s employees. A number of these were considered to be “highly critical of some members of senior management” informs the FCA.

The FCA goes on to highlight that the report found the Bank had “pursued a course of revenue at all costs and had a culture that was high risk and actively hostile to compliance.” In addition, “its main recommendation was that the Firm should replace or consider replacing some members of senior management.”

Indeed, at the time when the story first broke in The Mail on Sunday in January 2013 – just after Mr Tinney had resigned – the newspaper proclaimed that the report exposed “a culture of fear, intimidation, bullying and mismanagement at the bank”.

However, despite the recommendations and serious findings of the report, the FCA informs that, Mr Tinney suppressed the contents and denied the existence of the report.

Individual Accountability:

It seems that Mr Tinney was the only individual at Barclays to which the Culture Report had been delivered. Thus he was able to take steps to cover-up the report and ensure it would not be seen by any other, additionally informing the Consultancy not to circulate another copy and, following an anonymous tip-off email about the report, stated to others at Barclays “There has never been a Wealth Cultural Audit Report produced at any time.”

However, Mr Tinney’s decision to suppress the findings and recommendations of the Culture Report show that he did not act with integrity and thus go against being an Approved Person and the FCA’s Statements of Principle.

The Cost of Ignorance:

We have seen previously that the FCA does not take kindly to those who have received and ignored recommendations from compliance consultants, such as in the case of KeyData’s former Compliance Officer in May this year.

In fact the regulator has previously stated in a factsheet entitled Using Compliance Consultants that “when reviewing compliance with our requirements, we expect firms to have acted on recommendations from consultants where appropriate.” In addition, in an FCA website section entitled Compliance and other support the regulator informs that “The FCA is more likely to take action against firms that breach our requirements if they have not acted on previous recommendations from a compliance consultant.”

Large fines and life-time bans are not uncommon punishments from the regulator. Indeed, they will no doubt become more common going forwards with the introduction of the Senior Manager’s Regime this year that makes it easier to hold senior managers to account for failings, (though Mr Tinney’s case precedes this).

Today’s Decision Notice, sets out the regulator’s findings and recommendations that Mr Tinney should be publicly censured and banned from carrying out any senior management or Significant Influence functions in any regulated provider of financial services.

However, since Mr Tinney has challenged the FCA’s decision, the matter has been referred to the Upper Tribunal where both sides will present their case. Thus, today’s Decision Notice has no immediate effect and will be dependent upon the outcome from the Tribunal. So for now, only time will tell what the true cost will be in this case.

Serious Misconduct:

What is interesting to note is that the regulator considered Mr Tinney’s misconduct particularly serious given the fact that it occurred during the ‘Salsz review’ – an independent review of business practices that had been launched by the board of Barclays after the LIBOR scandal. This independent review, intended to examine the Firm’s values, principles and standards of operations – the historical culture - and make recommendations for change.

Thus the FCA state that “in that context, Mr Tinney should have understood the connection between the Firm’s culture and regulatory compliance, and the senior management’s ability and willingness to positively influence appropriate behaviour throughout the organisation.”

In addition, the FCA state that the fact that Mr Tinney wanted to assess whether the culture at Barclay’s Wealth division contributed to their regulatory deficiencies and was in fact the one who actually devised the Culture Audit demonstrated that this connection was understood.

Culture & Regulatory Compliance:

Regardless of the outcome of the Tribunal, this case highlights not only the responsibility that falls upon the shoulders of those in Senior Management, but also of the huge importance of creating the right culture within a firm.

Corporate culture and regulatory compliance clearly have a symbiotic relationship, yet to ensure that the relationship is mutually beneficial, it seems the right culture must be in place and importantly, set from the top.

Benefits of Compliance Consultants:

Compliance consultants, like the specialists at Compound Growth, often have many years of industry experience from having dealt with the ongoing response to ever-changing and developing regulatory standards over time.

This regulatory experience can be drawn upon, tailored and applied to the needs of your business to help you ensure your controls are appropriate.

If you should have any regulatory query or requirement you would like professional advice or assistance upon, please feel free to contact our helpful team of specialist for a no obligation discussion.

Remember, your firm must have appropriate processes and controls in place. You must have a suitable framework for your business to not only for assess and cover its risks but to also ensure that you meet your regulatory requirements now and going forwards.

Read our latest articles, news and views affecting compliance and regulation in the UK Financial Services Industry.