THE UK's financial watchdog has fined private bank Julius Baer more than £18m over its "corrupt" dealings with Russian oil company Yukos.

The UK's Financial Conduct Authority (FCA) yesterday fined the Swiss outfit's international business and sanctioned three of its executives over the private bank's use of third-party agents in carrying out business with Yukos Group.

The FCA claimed Julius Baer paid $3m (£2.5m) in fees to a third-party agent, Dmitri Merinson, in return for introducing the bank to companies owned by Yukos Group.

The fees were paid on the understanding Yukos companies would hand large sums of cash over to Julius Baer, through which the private bank could generate significant returns.

Yukos Group later made a series of "uncommercial" foreign exchange transactions with Julius Baer through which the Russian-owned companies were charged far higher than standard rates.

The proceeds of these foreign exchange transactions were subsequently shared between Julius Baer and Merinson in the form of commission payments.

Juliuis Baer became aware of the commission payments made to Merinson in 2012, but failed to report those matters to the FCA until 2014, despite suspecting a potential fraud had been committed.

Mark Steward, FCA executive director of enforcement and market oversight, said: "There were obvious signs that the relationships here were corrupt, which senior individuals saw and ignored."

"These weaknesses create the circumstances in which financial crime of the most serious kind can flourish."

Alongside the £18m fine, the FCA also imposed bans on three of Julius Baer's former executives.

(c) 2022 City A.M., source Newspaper