Compliance News | April 2023

Posted by

David Mangion

on 27 Apr 2023

This month's key compliance news includes a crypto exchange hack, two separate Goldman Sachs fines, updated whistleblowing laws, the LGBT+ pay gap, and more.

Compliance News April 2023

Our pick of key compliance stories this month

Goldman Sachs fined $15m for swaps violations

The Commodity Futures Trading Commission (CFTC) has fined Goldman Sachs & Co. LLC $15m for violating the CFTC's Business Conduct Standards for swap dealers.

The CFTC found that Goldman Sachs failed to disclose dozens of pre-trade-mid-market marks (PTMMM) and did not communicate with clients fairly and rationally, violating principles of fair dealing and good faith.

Goldman Sachs admitted that it failed to disclose accurate or any PTMMM for almost all "same-day" swaps executed in 2015 and 2016, violating a CFTC regulation. The order simultaneously filing and settling charges against Goldman Sachs & Co. LLC was made.

"The purpose of the CFTC's Business Conduct Standards is to promote transparency and fairness in the swaps market. The CFTC is committed to ensuring that swap dealers abide by these standards so that swap counterparties receive disclosures allowing them to assess material aspects of the swaps before entering into them. As today's penalty against Goldman demonstrates, the CFTC will aggressively pursue swap dealers that violate these business conduct standards."

- The CFTC

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LGBT+ workers earn less than their straight peers

A new survey has revealed that LGBT+ professionals in the UK experience a significant pay gap compared to their heterosexual counterparts, suggesting a lack of inclusion in the workplace.

The survey, which included 4,000 workers who identified as heterosexual, gay, bisexual, or 'other', found that, on average, LGBT+ workers earned 16% less than straight workers, amounting to an annual income difference of £6,703 before tax.

This pay gap is considerably higher than that between men and women in the UK, which stands at 9.6%. The survey was conducted by LinkedIn and UK Black Pride and included all forms of income, including wages, salaries, and rent payments.

LinkedIn's UK country manager, Joshua Graff, commented there is still a long way to go to create fully inclusive workplaces where all colleagues feel represented and included.
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Crypto exchange, Bitrue, suffers $23m hack 

Bitrue, a popular Asian cryptocurrency exchange, suffered a security breach resulting in hackers stealing almost $23m in various tokens, including ETH, QNT, GALA, SHIB, HOT, and MATIC.

Bitrue detected the unauthorised transactions and initiated a security audit, which revealed large withdrawals from hot wallets. The exchange has frozen all affected wallets, suspended cryptocurrency withdrawals, and promised to reimburse affected users.

The firm is working with blockchain security firms and other exchanges to recover the stolen assets and has reassured users that funds in cold wallets are safe.

The attacker was found to have exchanged most of the tokens for Ethereum, which is currently being held in a wallet. Bitrue has promised to release the wallet address of the hacker and the final list of stolen assets soon.

Key takeaways:

  • Cybersecurity measures - implement strong cybersecurity measures, restrict access to sensitive data, and require strong passwords
  • Employee training - train employees on cybersecurity best practices, such as recognising phishing emails and not sharing passwords
  • Incident response plan - have an incident response plan in place and regularly test it for effectiveness

Free Cyber Security Training Presentation

Synthetic USD Libor extended to September 2024

The UK FCA has granted banks an additional 15 months to stop using the synthetic version of USD LIBOR.

The regulator has extended the deadline for publishing 1- and 6-month synthetic USD LIBOR settings until September 2024, following feedback from the industry that some US dollar cash contracts would benefit from a continued publication.

However, the FCA confirmed that it has no intention to compel continued publication beyond this date.

The move is part of the transition from LIBOR to SONIA, which the FCA and BoE have promoted. The transition is considered critical globally, given that LIBOR underpins more than $300tn in derivatives and other instruments.

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New review aims to tackle autism employment gap

The UK Department for Work and Pensions (DWP) has launched a review to improve access to work for people with autism. The review, announced on World Autism Awareness Day, aims to identify barriers to employment for autistic individuals.

According to the government, employment rates for this group are particularly low, with less than three in 10 in work. The review will involve businesses, employment organisations, specialist support groups, and autistic people themselves.

Sir Robert Buckland has been appointed to lead the review, and the Minister for Disabled People, Health, and Work, Tom Pursglove, said that closing the employment gap for autistic people would benefit both individuals and the country's employment and productivity.

The DWP also noted that many of the adjustments and initiatives that would benefit autistic people could also help other neurodiverse individuals, such as those with ADHD, dyslexia, and dyspraxia.

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UK government to review whistleblowing laws 

The UK government is reviewing whistleblowing laws to improve the protection of whistleblowers and empower workers to report wrongdoing. UK employers will be expected to establish appropriate reporting channels for whistleblowers that are well-resourced and protect confidentiality.

The review is being led by the Department for Business and Trade, which will examine the effectiveness of current laws and consider how to facilitate disclosures best and protect workers. The review will also consider the definition of "worker" for whistleblowing protection purposes.

The government has highlighted whistleblowing as a crucial source of evidence for authorities tackling corruption, fraud and economic crime. The rise in whistleblowing complaints globally has been attributed to a growing awareness of ESG expectations and uncovering of allegations of sexual harassment.

Key takeaways:

  • Legal protection - Whistleblowers are protected by law, so companies must have policies in place to protect them from retaliation
  • Confidentiality - Whistleblowers must be able to report concerns confidentially, and companies should provide secure channels for this
  • Investigation - Companies must investigate concerns thoroughly, appoint an independent investigator, and keep whistleblowers informed of the progress and outcome

Free Whistleblowing Training Presentation

FCA issues warning about unregulated broker

The FCA has warned potential investors about TITAN LIMITED, a company offering financial services and products to clients in the UK without proper authorisation from the regulator.

The broker has been previously censured, and the FCA cautions against dealing with unauthorised financial firms. The FCA urges customers to avoid unregulated companies and report any suspected firms. Investors are reminded to check the FCA's Registers.

Reports show that investors have lost millions to fraudulent brokers, and complaints to the FCA helpline have risen by more than 50%. If things go wrong, the FCA warns that giving money to an unauthorised firm would not be covered by the Financial Ombudsman Service or FSCS.

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Goldman Sachs fined $3m for inaccurate reporting

Goldman Sachs has been fined $3m by the Financial Industry Regulatory Authority (FINRA) for mislabelling nearly 60m short-sell orders as long over at least three years.

The firm mismarked orders totalling more than 14bn shares from October 2015 to April 2018, causing inaccurate trade reports to FINRA and potentially leading to financial losses for investors.

FINRA also stated that Goldman Sachs violated some rules, which resulted in short selling only at a price above the current national best bid. The firm consented to FINRA's order without admitting or denying the findings and agreed to pay the penalty, be censured, and cease and desist from further violations.

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