UK regulators get “tougher” on financial wrongdoers

BY Fraser Tennant

UK regulators are “getting tougher on financial crime” by issuing increasingly stringent penalties to wrongdoers, according to new analysis published this week by EY.

EY’s Investigations Index reveals that, over the past two years, the punishments handed out by the UK’s regulatory bodies – the Financial Conduct Authority (FCA), the Serious Fraud Office (SFO), the Competitions and Markets Authority (CMA) and the Office of Fair Trading (OFT) – saw fines soar by 271 percent (with £2.45bn issued in the past two years) and prison sentences increase 124 percent. Company directors also face an average prison sentence of four years or more.

Additional findings in the EY study include: (i) 58 percent of cases investigated by the SFO resulted in prison sentences; (ii) 56 percent of cases investigated  by the FCA resulted in fines; (iii) of the 82 cases investigated by the FCA over the course of two years, 25 were against individuals; (iv) of those 25 cases, 36 percent resulted in prison sentences; (v) 10 percent of all cases dealt with individuals or firms committing fraud; and (vi) of the 125 cases investigated by the CMA and OFT in the past two years, 119 were due to a proposed or completed merger or acquisition.

“UK regulators are getting tougher on financial crime," said John Smart, head of EY’s UK Fraud Investigation & Dispute Services team. “In the wake of recent corporate scandals and growing political pressure, there seems to be a greater focus by the regulators to pursue cases that may once have been considered ‘too difficult’, to ensure those responsible for wrongdoing are held to account.”

Despite the tougher stance, the Index did find that the average prison sentence has decreased by 40 percent over the past two years, from 87 months to 52 months.

Nevertheless, Mr Smart believes that the Index findings should also serve as a warning to companies, to review their processes on a regular basis, stating that the top reasons for fines, namely systems failings, business misconduct and misleading information, were all factors that could have been avoided by having stronger control processes to identify and resolve any corporate blind spots.

The EY Index examined 231 cases (which took place between 1 October 2013 and 30 September 2015) involving fines and criminal prosecutions against business and individuals.

News: U.K. Regulatory Fines Soar Amid Crackdown on Financial Crime

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