Barclays 2013 Annual Report Download - page 143

Furthermore, the Group is from time to time subject to regulatory
investigations which carry the risk of a finding that Barclays has been
involved in some form of wrongdoing. It is not possible to foresee the
outcome or impact of such findings other than fines or other forms of
regulatory censure would be possible. There is a risk that there may be
other conduct issues, including in business already written, of which
Barclays is not presently aware.
Further details on PPI and interest rate hedging products, including a
description of management judgements and estimates and sensitivity
analysis on those estimates where available are provided in Note 28
(Provisions) to the financial statements. Further details on current
regulatory investigations are provided in Note 30 (Legal, competition
and regulatory matters).
Anti-money laundering, anti-bribery, sanctions and
other compliance risks
A major focus of government policy relating to financial institutions in
recent years (including, in particular, the UK and the US) has been
combating money laundering, bribery and terrorist financing and
enforcing compliance with economic sanctions. In particular,
regulations applicable to the US operations of Barclays Bank and its
subsidiaries impose obligations to maintain appropriate policies,
procedures and internal controls to detect, prevent and report money
laundering and terrorist financing. In addition, such regulations in the
US require Barclays Bank and its subsidiaries to ensure compliance with
US economic sanctions against designated foreign countries,
organisations, entities and nationals among others.
The risk of non-compliance for large global banking groups, such
as Barclays, is high given the nature, scale and complexity of the
organisation and the challenges inherent in implementing robust
controls. The Group also operates in some newer markets, such as
Africa, Asia and the Middle East, where the risks of non-compliance
are higher than in more established markets. Failure by Barclays to
maintain and implement adequate programs to combat money
laundering, bribery and terrorist financing or to ensure economic
sanction compliance could have serious legal and reputational
consequences for the organisation, including exposure to fines,
criminal and civil penalties and other damages, as well as adverse
impacts on the Group’s ability to do business in certain jurisdictions.
Failure to comply fully with the Consumer Credit Act (CCA3)
As an example of non-compliance leading to costs of remediation,
UK RBB has identified certain issues with the information contained in
historic statements and arrears notices relating to consumer loan
accounts and has therefore implemented a plan to return interest
incorrectly charged to customers. Barclays is also undertaking a review
of all its businesses where similar issues could arise, including Business
Banking, Barclaycard, Wealth and Investment Management and
Corporate Bank, to assess any similar or related issues. There is
currently no certainty as to the outcome of this review. The findings of
such review could have an adverse impact on the Group’s operations,
financial results and prospects.
Reputation risk
Reputation risk: Damage to Barclays’ brand arising from any
association, action or inaction which is perceived by stakeholders to
be inappropriate or unethical
Reputation risk is the risk of damage to the Barclays brand arising from
any association, action or inaction which is perceived by stakeholders
to be inappropriate or unethical and not in keeping with the bank’s
stated purpose and values (for example, the industry wide investigation
into the setting of LIBOR and other benchmarks and the mis-selling of
PPI to customers). Reputation risk may also arise from past, present or
potential failures in corporate governance or management (for
example, if Barclays were to provide funding or services to clients
without fully implementing anti-money laundering, anti-bribery and
corruption or similar precautions). In addition, reputation risk may arise
from the actual or perceived manner in which Barclays conducts its
business activities or in which business activities are conducted in the
banking and financial industry generally.
Failure to appropriately manage reputation risk may reduce – directly or
indirectly – the attractiveness of the Group to stakeholders, including
customers and clients, and may lead to negative publicity, loss of
revenue, litigation, higher scrutiny and/or intervention from regulators,
regulatory or legislative action, loss of existing or potential client
business, reduced workforce morale, and difficulties in recruiting and
retaining talent. Sustained damage arising from conduct and
reputation risks could have a materially negative impact on the Group’s
ability to operate fully and the value of the Group’s franchise, which in
turn could negatively affect the Group’s operations, financial condition
and prospects.
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