Macquarie Bank Hit with £13 Million Fine Over Trader’s Deceptive Fictitious Trades

In a costly lesson for the financial sector, the UK’s Financial Conduct Authority (FCA) has slapped Macquarie Bank Limited’s London Branch (MBL) with a £13 million fine. The penalty stems from serious control failures that allowed a junior trader to record over 400 fictitious trades in an audacious attempt to hide mounting losses.

Between June 2020 and February 2022, Travis Lloyd Klein, a trader on MBL’s London Metals and Bulks Trading Desk, exploited glaring weaknesses in the bank’s risk management systems. The result? Nearly two years of unchecked deception that ultimately cost the bank USD $57.8 million to untangle.

Klein’s scheme involved recording bogus trades in MBL’s internal systems—a move intended to cover up his trading losses. But what’s more surprising is how long he got away with it. Despite MBL knowing about weaknesses in its controls, the bank failed to patch them in time, leaving the door wide open for misconduct.

Over the course of 20 months, Klein bypassed not one, not two, but three critical layers of internal controls. For a trader described as relatively junior, that’s a scathing indictment of the bank’s oversight mechanisms.

In response, the FCA banned Klein from the financial services industry, stating he acted dishonestly and without integrity. Although the FCA initially proposed a £72,000 fine, Klein successfully claimed financial hardship, avoiding further financial penalties.

A Warning Shot from the FCA

Steve Smart, the FCA’s joint executive director of enforcement and market oversight, minced no words about the broader message this case sends, “MBL’s ineffective systems and controls meant that one of its employees could, at least for a time, hide trading losses which cost the firm millions to unwind. This should serve as an example to those we regulate; risk can come from within. You need the right systems to identify it so it can be tackled early.”

Smart’s statement cuts to the heart of the issue: internal threats can be just as damaging as external ones, and firms need to stay vigilant.

Macquarie Bank’s control failures didn’t just hit its bottom line—they exposed a broader compliance problem. While the fine itself is hefty at £13,031,400, it could have been even steeper. Thanks to MBL’s cooperation with the FCA, the penalty was reduced by 30% from an original £18.6 million.

For the bank, the fallout is a reminder of the high price of complacency. While the fictitious trades didn’t affect clients or the wider market, the cost of unwinding them was astronomical—money that could have been saved with better systems and faster action.

A Global Giant’s Local Misstep

Macquarie Bank, an Australian powerhouse in financial services, has operated in the UK through its London branch since 2001. It’s a seasoned player in global markets, but this incident underscores a humbling truth that even the biggest names aren’t immune to internal failures.

For compliance professionals and risk managers, the takeaway is crystal clear. Weak systems and delayed responses to known issues don’t just invite regulatory scrutiny—they create fertile ground for misconduct that can spiral out of control.

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