As we are all well aware, Santa Claus is busy at this time of year making a list of all those that have been naughty and all those that have been nice in 2016. To help him along in this time-consuming process, we’ve compiled a naughty list of firms fined by the Financial Conduct Authority (FCA) in 2016.
In 2015 the total sum of FCA fines stood at £905m; this year, the total is just £22m. The peak year of FCA fines was reached in 2014 when they reached £1.5bn.
Here are the five biggest FCA fines of the year:
5. WH Ireland - £1,200,000
Broker firm WH Ireland received a fine of £1.2m and 90-day ban on taking on new clients in their corporate broking division. Problems at the firm were identified as early as August 2013, when the FCA discovered they were failing to arrange ‘effective systems and controls to protect against the risk of market abuse’ (a breach of Principle 3). Poor governance, a deficient compliance oversight and weak market abuse controls all contributed to the FCA’s decision to impose a fine after WH didn’t go far enough in making improvements to its systems and controls to limit the risk of market abuse.
4. CT Capital - £2,360,900
A failure in its complaint handling process in relation to Payment Protection Insurance (PPI) landed lender CT capital with a fine of almost £2.37m. CT Capital was responsible as a parent company of a group of lenders for handling PPI complaints. The FCA found that for nearly a year CT failed to put into place specific provisions governing PPI complaints, and further that CT operated an ‘inappropriate policy in relation to rejecting complaints’. CT’s lack of appropriate handling processes, the FCA concluded, resulted in ‘customers missing out on redress payments to which they were entitled’.
3. Towergate Underwriting - £2,632,000
In July, the FCA handed insurance intermediary Towergate Underwriting a financial penalty of just over £2.6m for failing to protect clients’ assets and organise adequate risk management systems for client and insure money accounts (a breach of Principles 3 and 10). The FCA noted how Towergate had failed to recognise it was in breach of FCA rules on CASS for over 8 years, and further found Towergate didn’t detect for several years a client and insurer money account shortfall of over £12.5m due to ‘significant systems and control weaknesses’. Despite no loss of insurer money, the risk was such that the FCA handed to Towergate the third biggest fine of 2016.
2. Sonali Bank - £3,250,600
Bangladesh’s Sonali Bank (UK) Limited received the second biggest FCA fine of the year. The FCA described how Sonali had ‘failed to maintain adequate AML systems’ in August 2014; weaknesses were identified throughout its AML control and governance structure, and Sonali was non-compliant in terms of PEPs, CDD and SARs. Senior management were found to be failing to properly implement AML controls and were criticised by the FCA. Sonali’s MLRO Steven Smith received a separate fine of £17,900 and a ban on undertaking the compliance oversight at regulated firms. The FCA handed Sonali a £3.2m fine and a ban on accepting deposits from new customers for 168 days.
1. Aviva - £8,246,800
The largest FCA fine of 2016 was handed to insurance firm Aviva, who were found to have failed in their oversight of outsourced providers concerning the protection of client assets. Client Assets Sourcebook (CASS) rules were breached by Aviva, who were also found to have to neglected to implement controls over Third Party Administrators (TPA). In addition to these failures, deficiencies were also identified in Aviva’s internal reconciliation process, which resulted in under-segregation peaking at nearly £75m between February 2014 and February 2015. FCA Director of Enforcement and Market Oversight Mark Steward noted how this was the ‘first CASS case in relation to oversight failures of outsourcing arrangements,’ and warned the FCA would ‘continue to take action against firms that fall short of our CASS Rules’.
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