A Suspicious Trade, a Cyprus Transfer and a Relationship Manager's Dinner

Two overlapping suspicions arise. On market abuse, the timing of the £240,000 purchase three days before a 34% premium announcement, combined with Raj's attendance at a dinner where a corporate finance director referred to 'something big' about Halden, creates a realistic suspicion that inside information was passed and used. The failure to record the conversation is itself a control weakness. On money laundering, the Cyprus transfer to a cousin, the recent account, the inheritance from a foreign jurisdiction and the thin source-of-funds evidence are red flags for layering or third-party benefit. The MLRO should not wait to resolve both. Immediate steps are to preserve records such as emails, call recordings, calendar entries and trading records; restrict further dealing or transfers pending review; conduct enhanced due diligence on source of wealth; and make a suspicious activity report to the NCA if suspicion is held. The market abuse angle should be escalated separately to the market abuse team and considered for a notification to the FCA. The two processes should be coordinated but not merged, because the SAR regime is confidential and tipping-off restrictions apply.

For the SAR, the MLRO needs to decide whether there is suspicion, not proof, and should document the red flags and the decision. Key considerations are the £500,000 transfer request, the cousin's account, the source-of-funds gap, the client's profile and any adverse media or sanctions screening. The SAR should be submitted promptly; consent may be needed if the firm wants to proceed with a transaction. For market abuse, the firm should consider a suspicious transaction and order report to the FCA. The STOR is separate from the SAR and can be made without tipping off the client. The firm should also assess whether Raj's conduct breaches personal account dealing and conflicts policies and whether the corporate finance director's remark should be reported. Coordination matters: the FCA should not be told about the SAR, and the NCA should not be told about the STOR beyond what is permitted. The MLRO and market abuse officer should agree a single chronology.

Raj should be removed from the client relationship for the period of the investigation, not necessarily suspended, and should be interviewed with HR present. His communications should be preserved. The firm must avoid tipping off the client about the SAR; it can delay or refuse the transfer using lawful excuses such as pending verification without disclosing the SAR. The client should be treated fairly and the relationship managed by someone senior. If the firm terminates the relationship, it should do so on documented grounds and consider whether that itself risks tipping off. Confidentiality is important but not absolute: the firm must cooperate with the FCA and NCA. The investigation should be independent of the sales desk, and the findings should go to the board and, where relevant, to the regulator. The firm should also review its surveillance calibration and its recording of external meetings.