LeapRate Exclusive… As we reported recently, CFD broker Plus500 Ltd (LON:PLUS) has made progress in undoing the freeze of UK client accounts, reporting that of 23,000 customers who had logged into their accounts since the May 18 freeze more than 10,000 customers (or 44%) had completed remedial AML documentation procedures, with 8,457 accounts (37%) now fully reviewed and unfrozen.
Certainly good news for Plus500 and its trading customers.
LeapRate has also learned, via a series of confidential filings made with the FCA, that this was not the first time there was a client account freeze requested by Plus500 – and approved by the FCA.
Plus500 UK issued a document on October 31, 2014 to the FCA (see details below) requesting the right to freeze accounts of existing clients where Plus500 determined that there didn’t exist ‘verified adequate customer due diligence information’.
We understand that, at the time, a very small number of client accounts were frozen until the documentation for those accounts was deemed up to par.
The October 2014 document states:
Plus 500 UK Limited (“Plus 500”) hereby applies for a requirement to be imposed on Plus 500, pursuant to Section 55L (5) (a) of the Financial Services and Markets Act 2000 (“FSMA”) as set out in the Schedule below.
SCHEDULE
1. This schedule sets out the terms of a requirement to be imposed on Plus 500 pursuant to Section 55L (5) (a) of FSMA with immediate effect.
2. The requirement is that Plus 500 must:
(a) prohibit all account activity of existing customers; and
(b) not accept deposits from or open accounts for new customers
until it has obtained and verified those customers’ due diligence information in accordance with the Money Laundering Regulations 2007.3. For the avoidance of doubt:
(a) “prohibit all account activity” means ‘freeze accounts’ to prevent further deposits, trading activity or withdrawals.
(b) The requirements in paragraph 2 do not apply to the accounts of customers for whom Plus500 has obtained and verified adequate customer due diligence information.
4. An exception to the requirement in paragraph 2(a) is that Plus 500 may permit customers with open positions to close these on a business as usual basis, including adding variation margin funds if necessary prior to closure, but thereafter, all account activity, including the withdrawal of funds by the customer, must be prohibited until adequate customer due diligence information is provided by the customer and verified by Plus 500 in accordance with the Money Laundering Regulations 2007.
This requirement will remain in force until Plus 500 has satisfied the Authority that it is operating in compliance with the Money Laundering Regulations 2007 and SYSC 6.1.1 and SYSC 6.3.
In a further memorandum to the FCA dated May 15, 2015, Plus500 UK requested to expand the account freeze to ‘all Plus500 UK clients who have traded at least once in the last three months’. And as we now know, that blanket freeze of Plus500 UK accounts did go into effect as of May 18, remaining in effect until today, as outlined above.
The May 15 letter to the FCA reads as follows:
Plus500UK Limited (“Plus 500”) hereby applies for the imposition of requirements on its permissions, pursuant to Section 55L(5)(a) of the Financial Services and Markets Act 2000 (“FSMA”) as set out in the Schedule below.
SCHEDULE
1. This schedule sets out the terms of a requirement to be imposed on Plus 500 pursuant to Section 55L(5)(a) of FSMA with immediate effect.
2. Plus 500 must:(i) in relation to existing clients, prohibit all account activity unless and until it has (a) advised all active clients in writing by midnight 15 May 2015 to the most recent email and/or postal address that they are required to complete a new questionnaire and, where applicable, provide additional customer due diligence documentation; and (b) advised all clients which are not active clients in writing by midnight on 26 May 2015 to the most recent email and/or postal address that they are required to complete a new questionnaire and, where applicable, provide additional customer due diligence documentation; (c) received the completed questionnaire and any additional customer due diligence that may be required to ensure compliance with procedures and the Money Laundering Regulations 2007;
(ii) in relation to new clients, not take on any new clients after 12.00 am on Friday, 15 May 2015 unless and until it has implemented new AML procedures which enable Plus 500 to verify those customers’ due diligence information in accordance with procedures and the Money Laundering Regulations 2007;
(iii) in relation to new clients, not take on any new clients unless and until it has taken all necessary steps to ensure that its assessment of a client’s appropriateness complies with COBS, in particular COBS 10;
(iv) take all reasonable and necessary steps to ensure that all future financial promotions (including financial promotions made via Plus 500’s website) which are issued and capable of having effect in the UK (a) are balanced, fair, clear and not misleading; and (b) comply fully with the Conduct of Business Sourcebook (“COBS”).
3. For the avoidance of doubt:
(a) “prohibit all account activity” means ‘freeze accounts’ to prevent any further deposits, all trading activity or withdrawals;
(b) “active clients” means all Plus 500 clients who have traded at least once in the last three months;
(c) “procedures” refers to revised procedures which include revisions made to Plus 500’s AML policies and procedures following implementation of the recommendations set out in section 5 of the draft section 166 report dated 27 April 2015 (and any subsequent recommendations made by Kinetic Partners LLP and/or the FCA).
4. An exception to the requirement in paragraphs 2(i) is that Plus 500 may permit (i) existing clients with open positions but who have not completed a questionnaire and provided additional customer due diligence to close these on a business as usual basis, including adding variation margin funds if necessary prior to closure, but thereafter, all account activity, including the withdrawal of funds by the customer, must be prohibited until adequate customer due diligence information is provided by the customer and verified by Plus 500 in accordance with procedures and the Money Laundering Regulations 2007; and (ii) existing clients who have completed a questionnaire and provided any required additional customer due diligence to continue with all trading activity pending the skilled person review referred to in paragraph 5 below.
5. The existing skilled person (Kinetic Partners LLP) will review the steps taken by Plus 500 in compliance with paragraph 2(ii) above. A new skilled person will review the steps taken by Plus 500 in compliance with paragraph 2(i) above. The new skilled person will be appointed by Plus 500 under section 166 of FSMA subject to a timescale to be approved by the Authority.
6. Mr Mark Winton (Chief Executive) will attest to the Authority that Plus 500 has taken the remedial action set out in paragraphs 2(i), (ii) and (iii) above. Mr Gareth Derbyshire (Head of Compliance) will attest to the Authority that Plus 500 has taken the remedial action set out in paragraph 2(iv) above.
This requirement will remain in force until (i) the skilled persons appointed under paragraph 5 above have reviewed the remedial action taken by Plus 500 and confirmed to the Authority that Plus 500 has complied with the terms of the requirement set out at paragraphs 2(i) and (ii) above; and (ii) the attestations referred to in paragraph 6 above have been provided to the Authority.
For the official document, click here.