Should regulators be enforcers?

 

Tim Thomas asked this question at a TTF seminar  this lunchtime. His conclusion was they considered themselves a world-class regulator and a reluctant enforcer.

From comments made by Andrew Bailey (former CEO) and Mark Steward (former head of enforcement) and available on previous links, it looks clear that retail frauds have not been high on the FCA’s priority. Last year’s departure of Megan Butler from her post as transformation director suggests that FCA’s senior executive will itself be transformed but it seems to be beset with its recent legacy – BSPS , the various mini-bond scandals and the ongoing scandal over Libor. The FCA were certainly reluctant to comment on Blackmore to the BBC.

I am seeing both sides of the FCA this week. On  the regulatory side, I am working hard to introduce a new compliance and money laundering officer for AgeWage. The due diligence from my case officer is superb, I am learning more about these roles from his probing than I could ever have done from reading the Handbook. I don’t mind one bit having to work hard – that is what a Regulator should be doing.

On the enforcement side, I’ve seen yet another train crash with Blackmore, lazy and incompetent enforcement , a failure of the FCAs duty to its consumers.

Which begs the question , should the FCA be stepping up and become a world-class enforcer or should – as many are suggesting – enforcement come from criminal prosecutions? The problem with our criminal system is that there are not enough sufficiently qualified specialists in financial crime in the police.


What of The Pensions Regulator?

The same issues surround the Pensions Regulator where the confusion is increased by that organisation’s lack of understanding of retail saver behavior – or indeed what a scammer is after. We have such a variety of enforcement agencies within what was called “Bloom” (now the pension scams action group) that enforcement is a game of pass the parcel with no-one wanting to be left accountable when the music stops. This TPR response to a request for information on Project Bloom’s enforcement activities  shows just how inadequate Bloom had become.

While Project Bloom brings together stakeholders with different remits it does not have a dedicated enforcement arm, as a result any warrants will be executed by law enforcement agencies or bodies with the relevant capability. In some circumstances this will involve joint working between organisations that take part in Project Bloom and other Police Forces. Project Bloom also facilitates the sharing of information and expertise that can assist independent action by participating organisations.

TPR does not hold a central log of enforcement activity undertaken by Project Bloom partners.

Enforcement is not measured centrally – Bloom had no way of knowing what are the outcomes of its work. Its successor PSAG will also struggle.

Speaking at a recent Pension PlayPen coffee morning , Margaret Snowden announced that The Pension Scams Action Group , had got what Bloom had never had – a budget. But the budget was only measured in “six figures”. Frankly, this is playing at enforcement.

What then of Action Fraud?

Action fraud is the affiliation of various bodies associated with white collar crime. They are listed on the Action Fraud Website

Home Office
The Home Office leads on immigration and passports, drugs policy, crime policy and counter-terrorism and works to ensure visible, responsive and accountable policing in the UK. The Home Office funds the National Fraud Intelligence Bureau (NFIB) and Action Fraud.

City of London Police
The City of London Police is the national lead police force on fraud. It provides a central resource for counter-fraud policing and runs the National Fraud Intelligence Bureau (NFIB) and Action Fraud.

National Fraud Intelligence Bureau (NFIB)
The NFIB is where cases of fraud are reported to and was created by the police to help them catch fraudsters. All confirmed reports of fraud and cybercrime from Action Fraud are passed on to the NFIB.

The National Police Chiefs’ Council (NPCC)
The NPCC helps the police cut crime and keep the public safe by joining up the operational response to the most serious and strategic threats. Focusing on operational delivery and developing national approaches on issues such as finance, technology and human resources, they work closely with the College of Policing, which is responsible for developing professional standards.

Victim Support
The charity Victim Support gives free and confidential help to victims of crime, witnesses, their family, friends, and anyone affected across England and Wales. Everyone who reports fraud to Action Fraud is given the option to receive support from Victim Support.


Action Fraud needs a criminal justice system which supports it and deters criminals

But collectively, Action Fraud does not seem to add up to the sum of its parts. It is seen by victims and whistleblowers as too opaque and bureaucratic. The time it takes to deal with intelligence is too long and much whistleblowing and reports from those who have been robbed get no response at all. It would seem that the enforcers do not know enough about financial services or financial regulation to act decisively.

The time taken to bring crimes to court and the time in court are too long. We need ways to bring these timeframes down and increase throughput. We need top judges such as Elizabeth Gloster to help simplify the criminal system. If improved, enforcement will become quicker, more efficient and more of a deterrent


Self help groups

The perceived problem is that the various enforcement teams are under resourced and badly organised, which has thrown up self-help groups, organised by campaigners such as Al Rush, Angie Brooks and Andy Agethangelou. These groups have proved successful in getting publicity for scandals. The Facebook Groups for Blackmore and BSPS victims have led to the Panorama program and have shaped the impending redress scheme for steelworkers. The Transparency Task Force has become secretary to the All Parliamentary Group on Pension Scams and featured heavily in the Panorama program.

Both in terms of victim support and in exposing the deficiencies of the enforcement agencies, these groups have been highly effective. Add to them the work of Gina and Alan Miller’s True and Fair Campaign and there is a powerful political lobby for better enforcement.


A way forward

It makes sense to me , to get Government to look at both the Pensions Regulator and the FCA as regulators and not enforcers. Although the 2021 Pension Schemes Act gave TPR greater powers, these were primarily over technical issues to do with the funding of pension schemes and not aimed at tracking down and prosecuting fraud. The FCA, which has had the mantle of financial services policeman wrapped around it, has proved a reluctant enforcer at best.

The answer is surely not to try to make a silk purse out of a sow’s ear. Blackmore , London and Capital , Store First and Dolphin are all scams that have hit British and British Ex-pat consumers over the past five years. Before that it was pension liberation, today – scams seem to be focussed on offshore bond, SIPPS and Qrops with the Isle of Man, Malta and Gibralter being the soft-underbelly the scammers use as their bases.

All of these are investment frauds (as opposed to direct theft – along the lines of bank robberies). Consequently it is the investment platforms of offshore insurers such as Generali (Utmost). OMI (Quilter) and Friends Provident that are now being used to legitimise fraud. In Gibralter,  STM Fidecs continues to evade responsibility for losses from fraudulent investments. Meanwhile big banks such as Nomura, Leontec, Commerzbank and RBC are pumping out structured products that reward intermediaries and bankers but leave little for punters.

Advisers in Spain, Eastern Europe , Dubai and Malta are operating outside the UK regulatory perimeter in less rigorous regulatory conditions. People are being sold rubbish today with little or no protection.

Self help groups have a major part to play in whistleblowing on these obscure and malevolent practices. They need to be listened to and brought into the enforcement process.

Let’s hope that mounting pressure from UK politicians will lead to white collar crime, whether in the UK or offshore, being prosecuted by specialist enforcers who strike genuine fear into the scamming community. Let’s hope that our criminal justice system can evolve to meet the new scams around the corner.

We need to make a clear distinction  between the Regulator who prevents fraud and the Enforcer who prosecutes it.  Right now , we have regulators who are reluctant enforcers. Enforcers who know little of regulations.  That simply isn’t working.

About henry tapper

Founder of the Pension PlayPen,, partner of Stella, father of Olly . I am the Pension Plowman
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2 Responses to Should regulators be enforcers?

  1. con keating says:

    There is an important distinction to be made between a regulator and a supervisor – it is the responsible of a regulator to set the rules, but a supervisor to enforce them.

  2. Ian Neale says:

    I largely agree with you, Henry. A regulator should be vigilant in maintaining the credibility of its authorisation regime, and sanctioning compliance failures up to the ultimate penalty of withdrawing authorisation from a firm (or individual, as the case may be). Evidence of fraudulent activity should be shared with a robust prosecutor – which is what seems to be primarily lacking in this country. Something like the American SEC could be more effective.

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