FCA fines Macquarie Bank GBP 13 million for fictitious trades

The Financial Conduct Authority (FCA) revealed that Travis Klein, a trader who worked on the London metals and bulks trading desk of an Australian investment bank since August 2017, had hidden fictitious trades to cover up his trading losses from June 2020 to February 2022.

The fabricated trades went unnoticed earlier due to significant weaknesses in Macquarie Bank's systems and controls, some of which the company had already been informed about, according to the financial watchdog. Despite being aware of these vulnerabilities, the bank did not implement effective and timely measures to address them, as stated by the FCA.

Consequently, Klein managed to circumvent three important internal controls for over 20 months. The FCA has prohibited him from participating in the financial services sector due to his dishonest and unprincipled actions. Also, he would have faced a GBP72,000 fine if not for his successful claim of serious financial hardship.

The fictitious trades estimated cost - USD 57.8 million 

The fabricated trades resulted in Macquarie incurring an estimated cost of USD 57.8 million (GBP 46 million) to reverse the transactions, although they did not impact customers or the market. The FCA contends that had the bank acted more swiftly to address the deficiencies in its systems and controls, it could have significantly minimised this expense or potentially avoided it entirely.

The bank officials reported that the unauthorised trading was confined to one individual. This activity did not affect clients or the market, and neither Macquarie nor any other party received any financial benefit from it. Macquarie emphasised that it takes these issues very seriously and has committed considerable resources to learn from the incident. As a result, the bank has implemented several upgrades to its control environment.