BY PAUL O’DONOGHUE, Senior Correspondent
THE UK’s Financial Conduct Authority has fined broker Arian Financial £289,000 for its role in a tax rebate controversy.
The watchdog said Arian’s failure to implement AML controls put it “at risk of being used to support fraudulent trading and money laundering on behalf of clients of the Solo Group”.
The Solo Group is a hedge fund which used ‘cum-ex’ trading to claim massive tax refunds.
‘Cum-ex’ trading allowed multiple parties to claim tax rebates on a single dividend. The FCA said these transactions facilitated the Solo Group submitting withholding tax reclaims in Denmark and Belgium totaling nearly £1.1 billion, of which approximately £888 million was paid.
The Solo Group has said its trades were legal and merely exploited a loophole in the tax system. A criminal case involving the business is currently making its way through court in Denmark.
Arian executed over £52 billion in equity trades in Danish and Belgian stocks for Solo Group clients between 2014 and 2015, earning £547,000 in commissions.
“The trading was, throughout the period, circular, which is highly suggestive of financial crime,” the FCA said.
“It appears to have been carried out to allow the arranging of withholding tax reclaims in Denmark and Belgium.”
Arian admitted liability but referred the FCA’s proposed fine to the Upper Tribunal. The Tribunal reduced the fine that the FCA would have imposed from £744,745 to £288,962.53.
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