French AML ruling has ripples in U.S.; Barclays 4Q boosts Staley

Receiving Wide Coverage ...

Take that
Barclays reported better than expected results for the fourth quarter, sending “a strong message” to activist investor Edward Bramson “that its current strategy is working," according to the Wall Street Journal. "Chief Executive Jes Staley said the earnings potential of the bank is coming through and future excess capital will be used to pay dividends and buy back shares.” Wall Street Journal, Financial Times

Scott Eells/Bloomberg

The tax man always wins
A French court ordered UBS to pay a record €3.7 billion ($4.2 billion) fine for helping wealthy clients in France to evade taxes. It also ordered the Swiss bank to pay €800 million to the French government for lost tax revenue.

“If the verdict stands, France could set a new standard for higher tax and money-laundering penalties for the world,” the Journal comments. “That should concern all bank investors.”

“The trial cast a spotlight on how UBS used its operations in France to identify clients interested in moving funds to Switzerland to avoid scrutiny from French tax authorities,” the Journal added. “UBS bankers in Switzerland used methods ‘worthy of James Bond,’ prosecutors argued in court, to travel surreptitiously to France and meet with French clients at parties and other events organized by UBS bankers in France.” The bank denied the charges and said it would appeal.

“If upheld, the fine would be the largest for any tax case in French history and wipe out a year’s profit for UBS,” the Financial Times says.

“UBS spared no expense in enticing wealthy French people to open bank accounts in Switzerland,” the New York Times reports, including “boxes at the Paris Opera. Prime seats at the French Open. Luxury hunting retreats in Normandy.”

Meanwhile, Danske Bank said the U.S. Securities and Exchange Commission has opened an investigation into the money-laundering scandal at Denmark's biggest bank. The Department of Justice has already launched a criminal probe into the matter.

Separately, Swedish bank Swedbank saw its stock drop 13% following a television news report that it “handled billions in suspicious funds, some of which could be traced to the massive money-laundering scandal at Danske Bank.” Sveriges Television “cited classified documents detailing Danske Bank’s dealings with Swedbank as the basis for its report.” Wall Street Journal, Financial Times

Moving on
HSBC’s co-head of global banking, Robin Phillips, is leaving the bank this summer. Phillips, who has been head or co-head of the division for the last 13 years, “was thrust into the spotlight in August after a letter, purportedly written by employees, attacked his leadership and said the global banking unit was struggling to attract and retain talent.”

Greg Guyett, who HSBC hired away from JPMorgan Chase last October as Phillips’ co-head, will become sole head of the unit.

Rough day for blockchain
Blockchain “has dropped to the bottom of Gartner Inc.’s annual list of the most disruptive data and analytics capabilities for enterprise IT — replaced by tools that leverage artificial intelligence and machine learning.” The consulting firm “identified augmented analytics, which uses artificial intelligence and machine learning to better develop, consume and share data, as the number one analytics trend.”

To add insult to injury, MIT Technology Review is reporting that blockchains, previously touted as unhackable, are being hacked. “We shouldn’t be surprised. Blockchains are particularly attractive to thieves because fraudulent transactions can’t be reversed as they often can be in the traditional financial system. Besides that, we’ve long known that just as blockchains have unique security features, they have unique vulnerabilities. Marketing slogans and headlines that called the technology ‘unhackable’ were dead wrong.”

Wall Street Journal

Bad timing
Deutsche Bank, which has had plenty of other problems to deal with over the past several years, lost $1.6 billion over a nine-year period “on a complex municipal-bond investment that it bought in the runup to the 2008 financial crisis, and failed to confront head-on even as markets were upended and regulations tightened. The loss, which hasn’t previously been reported, represents one of Deutsche Bank’s largest ever from a single wager — roughly quadruple its entire 2018 profit — and ranks as one of the banking industry’s biggest soured bets in the last decade.”

The bank “resisted for years reducing the value of those bonds and related derivatives on its books to a level that markets suggested they were worth, and it brushed aside concerns raised by the bank’s financial auditors about how it was valuing the trade. Behind the scenes, the badly timed bet exerted a sustained drag on the bank’s finances.”

Payback time
Gladius Network, a startup that helps companies defend against cybersecurity attacks, agreed to pay back investors to settle Securities and Exchange Commission charges that its sale of digital tokens may have broken investor protection laws.

Quotable

“It will be several years before four or five major blockchain technologies become dominant.” — Gartner Inc. in its annual report on the most disruptive technologies.