* Fine relates to 1.9 bln stg transaction for rich clients
* FCA declines to name clients involved in transaction
* Bank kept documents in safe to avoid electronic storage
* Seventh significant fine from UK watchdog in 6 years (Adds details)
By Steve Slater and Huw Jones
LONDON, Nov 26 (Reuters) - Britain's financial watchdog hasfined Barclays 72 million pounds ($109 million) forcutting corners in vetting wealthy customers in order to win ahuge transaction described by one senior manager as potentiallythe "deal of the century."
Barclays arranged the 1.9 billion pound transaction in 2011and 2012 for a number of rich clients deemed by the regulator tobe politically exposed persons (PEPs), or people holdingprominent positions that could be open to financial abuse.
That should require a bank to conduct more detailed checkson them, but Barclays failed to do so and in fact cut cornerswith its compliance procedures, Britain's Financial ConductAuthority (FCA) said in a damning report on Thursday.
"Barclays did not follow its standard procedures, preferringinstead to take on the clients as quickly as possible andthereby generated 52.3 million pounds in revenue," the FCA said.
It said the bank took unusual steps to keep the details ofthe clients and the transaction off its computer system, whereit would normally be recorded.
These included buying a safe specifically for storing somedocuments relating to the clients and agreeing to pay theclients 37.7 million pounds if their names were ever revealed.
"Barclays went to significant lengths to accommodate theclient to ensure that it won their business," the FCA said in a37-page notice on the bank's failings.
"Barclays' approach was to request information only if itwas absolutely necessary and did not want to 'irritate' theclients with multiple requests," it added.
Just over 52 million pounds of the penalty compriseddisgorgement, meaning clawing back the profit Barclays made onthe transaction. That is the largest disgorgement penalty everimposed by the FCA.
The watchdog made no criticism of the clients, and gave fewclues on their identity. It said Barclays described their wealthas coming from "landholdings, real estate and business andcommercial activities."
Barclays, which received a 30 percent discount on the finefor settling early, said the FCA made no finding that the bankfacilitated any financial crime in relation to the transactionor the clients on whose behalf it was executed.
"Barclays has cooperated fully with the FCA throughout andcontinues to apply significant resources and training to ensurecompliance with all legal and regulatory requirements," it said.
The FCA said the failings were not identified by Barclays,however. It was only after the regulator discussed thetransaction with the bank that it gathered more information onthe relationship with the clients.
The deal's size meant "very significant" harm could havebeen done to the integrity of the UK finance system and societyif it had been related to criminal activity, the FCA said.
"ELEPHANT DEAL"
The fine is the seventh significant penalty imposed onBarclays by Britain's regulator in the past six years, includingpenalties for allegedly manipulating Libor interest rates andforeign exchange prices.
The series of scandals means improving standards and culturewill be a key task of the bank's new Chief Executive Jes Staley,who starts on Tuesday.
The FCA said several members of Barclays' senior managementwere aware of and endorsed the transaction, and said fiveindividuals were identified as giving part approval for it, butit did not name any individuals at fault.
It said the bank set up "a select team", including seniormanagers, to carry out checks and arrange and execute the deal,which was known by those involved within Barclays as an"elephant deal" because of its size.
Bob Diamond was the chief executive of Barclays from thestart of 2011 until he left in July 2012. The head of its wealthmanagement business in 2011 and 2012, which oversees dealingswith rich clients, was Tom Kalaris. He stepped down in May 2013.
A spokesman for Diamond declined to comment, while Kalariscould not immediately be reached for comment.
The deal was the largest Barclays had ever executed forwealthy clients and in its early stages one senior manager saidit could be "the deal of the century," according to the FCA.
The bank failed to establish adequately the purpose andnature of the deal and did not sufficiently corroborate theclients' stated source of wealth and source of funds for thetransaction, the FCA said.
It was a structured finance deal comprising investments innotes backed by underlying warrants and third party bonds. Theaim was to deliver a specific rate of income with a fullguarantee on the capital over a number of decades.
The regulator listed nine features that should have raisedred flags for Barclays, including its complex structureinvolving offshore companies, and that at one point clientsrequested Barclays make a payment of several tens of millions ofdollars to a third party, which was not made.
(Editing by Mark Potter)
Barclays (BARC)
