Regular readers of CFDs Weekly may have seen some interesting news regarding Britannia Global Markets emerge over the past couple of months.
For those not familiar with the company, Britannia provides a mix of prime-of-prime solutions and trading services. It’s geared more towards the ‘professional’ side of the market on the retail front but appears to focus mainly on providing services to institutions.
The company is owned by Venezuelan businessman Julio Herrera, who is also the reason the firm has been in the news. Prosecutors in the US have indicted Herrera for trying to bribe Wanda Vazquez, the former governor of Puerto Rico, by supporting her re-election campaign in 2020.
Herrera owns a bank called Bancredito International (BCI) in the US jurisdiction and, in return for the bribe, Vazquez was supposed to fire the person leading a regulatory investigation into BCI. Herrera denies the charges.
The investigation into BCI pertains to a series of events which took place between 2016 – 2019. According to the Puerto Rican financial regulator, there were…
“Multiple apparent violations of law [at BCI]…related to reporting of suspicious activity and foreign bank accounts, and due diligence on foreign correspondent accounts, in addition to significant deficiencies in internal controls, independent testing, and supervision.”
Many of these suspicious transactions allegedly involved bank accounts in Venezuela controlled by Herrera, a country that he has been wanted in since 2009 for financial fraud.
On the back of these findings, BCI was forced to sign a document, agreeing to make a number of changes to its corporate structure within six months. Failure to do so would result in the bank being fined and possibly shut down.
However, Herrera purportedly did as much as possible to avoid signing the agreement and was also recorded allegedly trying to bribe the current governor of Puerto Rico, Pedro Pierluisi, with $50,000 in return for closing the regulatory investigation.
When news of an indictment first emerged in May, Herrera resigned as a director of Britannia. However, two of his relatives appear to still be company directors and he is still the company’s owner.
When reporters from Sarawak Report asked if Herrera’s resignation was connected to the legal investigation, Britannia’s legal team denied that such an investigation existed. When it emerged that it did in fact exist, they simply said that Herrera denies all the charges.
Now I know what you’re thinking – this all sounds totally legit, Herrera seems like a great guy, and I’d love to start using Britannia’s prime-of-prime services for my FX trades. Hold on there for a second though because, as wild as this may sound, the banks that provide the company with prime services may not feel the same way.
According to its website, Britannia has prime brokerage relationships with Standard Chartered and NatWest.
It would be bad enough for both banks if it transpired they were doing business with a company owned by a man wanted in Venezuela for fraud, who may use the financial institutions he controls for nefarious purposes, and is now indicted in the US for wire fraud, conspiracy, and bribing a public official.
That this is happening in the public eye makes things even worse. This story is being reported in the BBC, with Britannia mentioned as a key part of it.
Now imagine you are in the prime brokerage team at NatWest or Standard Chartered. The amount of money you’re making from Britannia, in the grand scheme of things, is miniscule but the reputational and regulatory risk is huge. You are clearing trades for a company controlled by a guy who…
- May have made fraudulent transactions using his own business.
- Is on trial in the US for various crimes, at the heart of which is a financial institution.
This is not good. Is it really so far-fetched then to think that Standard Chartered and/or NatWest will just stop providing services to Britannia? It seems plausible.
Britannia’s FX Prime Manager Richard Maguire also left the company in July, around the time the indictment against Herrera was being made public. It’s possible that was coincidental but it does seem a bit odd and the company does not appear to be hiring anyone to take his place.
Having said all this, it’s worth keeping in mind that Britannia and Herrera aren’t one and the same thing and I’m sure everyone there is just trying to do their job, as with any other company.
As a result, it’s entirely possible nothing will come of this and the company will keep its prime brokerage relationships in place. But if it does happen then, hey, you heard it here first.