Tuesday, April 02, 2013
UK regulatory bodies have fined firms over £1billion since 2007
Is being a director in the UK risky business? Certainly if you are not operating above board!
Ernst & Young’s fraud and investigations team has recently conducted research which reveals
that the total fines issued to UK firms and executives for fraudulent
activity has exceeded £1billion. 68% of these fines have been applied to
the financial services industry.
The
data compared the penalties imposed on firms and individuals alongside
the reasons behind the fine. The investigation found that since 2007, UK
companies have
been fined a total of £976,119,238 whilst individuals have been fined a
total of £45,967,462. The study found that 68% all cases of fraud over
the past five years were within the financial services industry, with
cases of financial fraud highest in the mortgage
industry and specialized finance sector. Overall, the total fines for
the financial services industry exceeded regulatory censure.
Here's a copy of the press release we were provided with this morning:
London, 2nd April 2013
UK regulatory bodies have fined firms over £1billion since 2007
The Fraud Investigation and Dispute Services team at
Ernst & Young
has today released new research revealing that the total fines issued
to UK firms and executives for fraudulent activity has exceeded
£1billion in the past five years, with 68% of
the fines being applied to the financial services industry (which
equates to 55% of the total value).
The
study collected data from over 700 cases of fraud reported since 2007
using information provided by three major UK governing bodies. The data
compared the penalties
imposed on firms and individuals alongside the reasons behind the fine.
The investigation found that since 2007, UK companies have been fined a
total of £976,119,238 whilst individuals have been fined a total of
£45,967,462.
The
study found that 68% all cases of fraud over the past five years were
within the financial services industry, with cases of financial fraud
highest in the mortgage
industry and specialized finance sector. Overall, the total fines for
the financial services industry exceeded regulatory censure.
John Smart, Partner at Ernst & Young said:
“It
is worrying to see that the regulators have needed to step in so
frequently and issue punishments of this severity to businesses and
executives. Just under half
of the penalties handed out in the past five years have been monetary
fines and the market, for the most part, is not in a condition for
businesses to be losing money due to negligence. These results should
serve as a stark warning to all businesses in the
UK to get their houses in order.
“Whilst
the results vary across different industries, firms should be mindful
that these are not isolated situations, and fraudulent actions can occur
across all industries
and all sizes of business.”
The
study’s findings also revealed that individual prison sentences across
all regulatory prosecutions ranged from eight months to ten years, with
partners and directors
receiving the heaviest punishments. The research reveals that since
1997, the average prison stay of a convicted fraudster – either acting
individually or on behalf of a company - is 2,000 days.
John Smart concludes:
“The
extent and variation in the level of fines and prison sentences sends a
clear message to UK businesses and their employees that misconduct will
not be ignored.
Board members will need to take a good look at what they are doing and
undertake a full risk and systems review in order to identify any blind
spots and identify who the fraudsters are. Firms that fail to take
appropriate action in this area not only risk
fines and sentencing, but may also cause irreparable damage to their
brand.”
Additional findings from the research include:
- The average prison sentence for the director of a company that has committed fraud is 3 years and 3 months
- 45% of all fines in the past five years were between £10,000 and £100,000.
- The
consumer staples industry, incorporating food, beverages tobacco and
household goods, had the second largest total of fines and the largest
average fine at £56,342,307.75, despite making up just 2% of all cases.
Notes on the research
Data
was collected on 721 cases from information provided by the FSA
(Financial Services Authority), SFO (Serious Fraud Office) and OFT
(Office of Fair Trading). Data was collected from the governing body’s
websites, official press statements and from news sources including: BBC
News, Accountancy Age and Legal Week.
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Number of investigations since 2007, split by industry sector
|
%
|
|
Financial Services
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69%
|
|
Consumer Discretionary
|
17%
|
|
Industrials
|
4%
|
|
Healthcare
|
2%
|
|
Energy
|
3%
|
|
Information Technology
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2%
|
|
Consumer Staples
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2%
|
|
Materials
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1%
|
|
|
|
|
Average fine since 2007, split by industry sector
|
All
|
|
Financial Services
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£1,955,249.42
|
|
Energy
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£536,331.08
|
|
Information Technology
|
£140,000.00
|
|
Consumer Staples
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£56,342,307.75
|
|
Consumer Discretionary
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£2,457,070.59
|
|
Industrials
|
£31,347,949.91
|
|
Materials
|
£99,837.18
|
|
Healthcare
|
N/A
|
|
|
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posted by Unknown at
10:30 AM - permalink
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