FCA probe secures £31.7 million payout for WealthTek clients

CACEIS UK agreed to make the voluntary payment to clients of the defunct wealth manager WealthTek after an investigation by the Financial Conduct Authority (FCA) revealed the bank had exposed clients to “serious risk”.

The bank was appointed as sub-custodian bank for WealthTek – then known as Vertus Asset Management LLP – in November 2020, making it responsible for keeping the assets of WealthTek clients safe, including after the company entered administration in 2023.

However, an FCA investigation identified three glaring errors that contributed to CACEIS UK’s ultimate failure to conduct is its business with due skill, care and diligence, in accordance with Principle 2 of the FCA’s Principles for Businesses. The FCA determined that the failure to take action, in view of the bank’s financial crime prevention obligations under SYSC 6.1.1R, 6.3.1R and 6.3.3R and regulations 18, 27 and 28 of the Money Laundering Regulations, amounted to a breach of Principle 2.

The FCA identified that CACEIS UK had failed on three separate occasions to take “sufficient action” on learning that WealthTek was not authorised on the Financial Services Register to hold certain client assets; that it failed to notice that WealthTek was not permitted to hold client money; and that it failed ultimately to monitor client accounts properly.

In its final notice (26-page / 231KB PDF), the FCA said that it censured the bank and, in lieu of imposing a fine, accepted its agreement to make a £31.7m voluntary payment to compensate WealthTek’s clients who had not been able to reclaim their money in full. This amount is roughly commensurate with the financial penalty the FCA said it would have imposed against the bank if it had not agreed to make a voluntary payment and settle the case.

The FCA concluded its investigation in 13 months. It brings the total amount for WealthTek clients secured by the FCA to over £57m in just over a year after the regulator took similar actions against Barclays Bank UK and Sapia Partners for failing to protect WealthTek clients’ money. Both firms also agreed to make voluntary payments to be distributed directly to WealthTek clients.

In December 2024, the FCA separately charged WealthTek’s founder, John Dance, with nine offences, including alleged fraud and money-laundering, between 2014 and 2023. He is due to stand trial in September 2027. Separate civil proceedings brought by the FCA in April 2023 are expected to remain paused until the criminal proceedings have been concluded, or when otherwise directed by the courts.

Jonathan Cavilll, financial services regulation expert with Pinsent Masons, said: “The FCA is living up to its promise not to necessarily impose fines where firms seek to do the right thing – in this case, proactive cooperation with investigation, acceptance of failing from an early stage, and paying sizeable redress commensurate to the financial harm to retail customers identified over a protracted period of over two years”.

Sébastien Ferrière, financial services regulation expert at Pinsent Masons, said: “The case continues a trend of the FCA taking action against firms considered not to have discharged obligations to prevent financial crime. In this case, the principle harms related to not adequately acting on customer due diligence and following the identification of specific issues – such as a customer carrying out business for which it is not authorised – but the FCA also noted a number of transaction monitoring weaknesses which informed its decision”.

Tom Murrell, financial services regulation expert at Pinsent Masons, said: “This case took only 13 months which is well below historic averages for the investigative phase of FCA enforcement cases, and within the FCA's stated operational objective of concluding investigations within 16 months or less. Of course, these sorts of timeframes are easier to achieve in uncontested cases, such as this one”.