On 10 January 2025, the United Kingdom Financial Conduct Authority (UK FCA) announced that it had fined Arian Financial LLP £288,962.53 for failings in its systems and controls against financial crime. The UK FCA found that Arian’s shortcomings exposed the firm to risks of facilitating fraudulent trading and money laundering linked to cum-ex trading schemes and withholding tax reclaims.
The investigation revealed that between January and September 2015, Arian executed over-the-counter equity trades totalling approximately £37 billion in Danish equities and £15 billion in Belgian equities for clients associated with the Solo Group. These trades, described as circular and indicative of financial crime, were used to arrange withholding tax reclaims in Denmark and Belgium. During the period in question, the Solo Group submitted tax reclaims amounting to £899.27 million to Danish authorities and £188 million to Belgian authorities, of which payments of £845.9 million and £42.33 million, respectively, were disbursed.
Arian earned approximately £546,949 in commissions from these trades but failed to implement adequate systems to detect or prevent suspicious activities. The UK FCA identified clear red flags in Arian’s operations that the firm neglected to address, in breach of Principles 2 and 3 of the UK FCA’s Principles for Business, which require firms to conduct their activities with due skill, care, and diligence and maintain effective risk management systems.
While Arian admitted liability, it challenged the UK FCA’s proposed fine of £744,745 at the Upper Tribunal. The Tribunal upheld the seriousness of Arian’s misconduct but reduced the fine to £288,962.53, taking into account net financial benefits received by Arian after fees paid to Solo Group entities and brokers.
This case is the UK FCA’s seventh enforcement action concerning cum-ex trading, which involves exploiting dividend arbitrage strategies to reclaim withholding taxes inappropriately. The UK FCA has previously imposed over £22 million in fines related to cum-ex and withholding tax schemes, working collaboratively with EU and global law enforcement agencies to address such misconduct.
Steve Smart, the UK FCA’s Joint Executive Director of Enforcement and Market Oversight, stated: “Arian failed to identify red flags which ought to have been obvious. The controls the firms we regulate have in place are an important line of defence against our financial system being abused for criminal ends. Arian’s fell short of what we expect. We are pleased that the Tribunal recognised the seriousness of Arian’s misconduct.”
By holding firms accountable for lapses in financial crime controls, the UK FCA aims to uphold trust and transparency within the UK financial sector.
