New York regulator fines Barclays $15 million for whistleblower program flaws

New York’s Department of Financial Services fined Barclays Bank PLC and its New York branch $15 million Tuesday because of attempts by the bank’s CEO, Jes Staley, to unmask a whistleblower “in contravention of Barclays’ established whistleblowing policies and procedures.”

The DFS said it found “shortcomings in governance, controls and corporate culture relating to Barclays’ whistleblowing function.”

Those flaws “permitted a sequence of events that potentially could have had a detrimental impact on the efficacy of Barclays’ whistleblowing program.”

In May this year, UK regulators fined Staley £642,430 (about $871,000) for trying to identify at least one anonymous whistleblower who made allegations about Staley’s role in recruiting another employee.

The Financial Conduct Authority and the Prudential Regulation Authority said Staley failed to “act with due skill, care and diligence” by trying to hunt down the whistleblower.

In a statement Tuesday, New York’s DFS said several members of Barclays senior management didn’t follow whistleblowing program and instead protected the CEO and the bank itself.

The regulator also said it found “limited gaps” in Barclays’ whistleblowing policies and procedures.

Barclays’ “cultural transformation” that its compliance group “had been working hard to instill in the more than one hundred thousand Barclays employees worldwide, was not nearly complete,” the DFS said.

An anonymous whistleblower who claimed to be a Barclays shareholder sent a letter to the bank’s board in 2016. A later anonymous letter purportedly came from a group of Barclays’ employees. The letters raised nearly the same concerns about how a senior Barclays’ employee was recruited and Staley’s role in the hiring.

Barclays’ chief compliance officer and general counsel both “firmly advised” Staley several times not to try to identify the author or authors of the letters, the DFS said Tuesday.

But Staley asked Barclays’ security chief, Troels Oerting, to find out who wrote the first letter, which had a U.S. postmark.

Oerting asked U.S. federal law enforcement authorities for help tracking down the sender.

After the UK fined Staley for failing to “act with due skill, care and diligence,” Barclays’ board cut his annual bonus by £500,000 ($678,000). He had earned £2.35 million ($3.19 million) in 2016 and received a bonus of £1.3 million ($1.76 million).

Staley, 62, an American banker originally from Boston, said in a statement to the BBC in May that his personal involvement in the whistleblower complaints was inappropriate. “I have apologized for mistakes which I made,” he said.”

“I accept the conclusions of the board, the FCA, and the PRA, following their respective investigations, and the sanctions which they have each applied,” Staley said.

Tuesday’s $15 million consent order (pdf) also requires Barclays to submit to the DFS an “enhanced written plan for internal controls and a compliance program” and a board oversight plan “with best practices for whistleblowing.”

The bank must also report any attempts since the start of 2017 to identify whistleblowers or retaliate against them.

The FCPA Blog | December 19, 2018