The US Department of Justice (DoJ) is investigating how Barclays secured a licence to operate its wealth management unit and investment bank in Saudi Arabia in 2009.
The investigation centres on whether Barclays breached the US Foreign Corrupt Practices Act (FCPA) by making improper payments to secure the licence.
Go deeper with GlobalData
The FCPA makes it unlawful for businesses to make payments to foreign government officials to assist in obtaining or retaining business.
The act enables the US authorities to impose heavy fines and potentially prosecute individuals if corruption is carried out by a company with strong ties with the US.
A Barclays spokesman confirmed the DoJ and US Securities and Exchange Commission (SEC) were undertaking an investigation into whether the group’s relationships with third parties who assist Barclays to win or retain business are compliant with the FCPA.
"It is not a wealth management unit issue; it is more of an issue that concerns Barclays Saudi Arabia," the spokesman added.
How well do you really know your competitors?
Access the most comprehensive Company Profiles on the market, powered by GlobalData. Save hours of research. Gain competitive edge.
Thank you!
Your download email will arrive shortly
Not ready to buy yet? Download a free sample
We are confident about the unique quality of our Company Profiles. However, we want you to make the most beneficial decision for your business, so we offer a free sample that you can download by submitting the below form
By GlobalData
Saudi Arabia authorities: "licence granted according to official rules"
Barclays, which trades its securities on the New York Stock Exchange, was one of several banks to enter Saudi Arabia after 2008 when the Saudi Capital Market Authority liberalized foreign companies’ access to the Gulf kingdom.
Saudi Arabia’s Capital Market Authority, established in 2005, confirmed on Sunday it granted Barclays the licence to operate in the kingdom according to official rules and after making sure the bank had met all necessary conditions and requirements.
In a statement obtained by Al Arabiya, the authority said Barclays Bank was given the licence in August 2009 and the final green light to start securities trading in May 2010.
Alleged payments after Saudi’s accession to the WTO
According to the Saudi Foreign Investment Law of 2000, a foreign investor may apply for multiple licenses permitting different activities, provided that the foreign investor is not the owner of /or a shareholder in a project which is or has in financial default.
Since the accession of Saudi Arabia to the World Trade Organization (WTO) in 2005, the Saudi banking industry has expanded substantially.
As for December 2011, twenty-one banks were operating in the country compared to 13 banks in 2005.
Out of these banks, there were 9 foreign bank branches and 6 joint-venture banks, which represented about 74% of the total number of operating and approved licensed banks in Saudi Arabia, according to the WTO’s Trade Policy Review Body.
Investigation piling up after £290m fine
The news comes after Barclays paid £290m to settle allegations some of its traders manipulated London interbank offered rate (Libor) and related interest rates, and reported a pre-tax loss of £47m last quarter.
The bank also took aside £700m to compensate customers who were mis-sold payment protection insurance.
Unconnected investigation in Qatar and US
The Saudi probe was unveiled only months after Britain’s Serious Fraud Office (SFO) and Financial Services Authority led an unconnected UK investigation into payments made by Barclays to Qatar in 2008.
The SFO this week delivered Barclays with a "section two notice", which obliges the UK bank to hand over documents and witnesses.
Last week Barclays also admitted that it faced a record fine of $435m from US regulators, plus restitution of $35m in profits, for allegedly buying and selling electricity in enough volume to move exchange prices up or down to benefit parallel positions in the derivatives market.
