The UK Financial Conduct Authority (FCA) has been exposed as a deeply flawed institution in a recent report by the All-Party Parliamentary Group (APPG) on Investment Fraud and Fairer Financial Services. This investigation highlights systemic incompetence, alarming treatment of whistleblowers, and a failure to act in the interest of victims, many of whom are EFRI members. The findings directly implicate the FCA as a key enabler of financial scams due to its inability to prevent or adequately address misconduct
Key Findings:
Incompetence and Lack of Accountability:
- The FCA is described as “incompetent at best, dishonest at worst.”
- Respondents unanimously criticized the FCA’s slow and inadequate response to reported issues.
- Whistleblowers revealed a toxic culture, with significant focus on self-preservation rather than protecting consumers.
Failure to Protect Victims:
- Victims of investment scams and bank misconduct, including SMEs, suffered catastrophic financial losses exceeding £547.6m. The FCA offered negligible support, with most respondents labeling its actions as obstructive.
- One notable case, the Connaught Scandal, exemplifies the FCA’s negligence. A whistleblower provided clear evidence of wrongdoing, yet the FCA ignored the warnings for years, allowing investor losses to mount.
Betrayal of Whistleblowers:
- Whistleblowers face severe personal and professional consequences. One whistleblower reported being publicly outed by the FCA, leading to career destruction, family harassment, and death threats.
- The FCA’s failure to protect whistleblowers undermines its credibility and deters future disclosures of misconduct.
Alignment with Financial Institutions:
- Evidence suggests the FCA is culturally and economically aligned with large banks and firms, resulting in reluctance to act against them.
- Victims of bank misconduct described the regulator as captured and ineffective.
Organizational Dysfunction:
- The FCA’s past Transformation Programme has been deemed ineffective, with stakeholders describing the institution as opaque and unaccountable.
- Reports of acting in bad faith and a defective organizational culture persist.
EFRI´s Stance on the Report!
This report confirms EFRI’s stance that the FCA’s failures directly contribute to members falling victim to financial scams. By neglecting its regulatory duties, failing to act on intelligence, and prioritizing self-interest over consumer protection, the FCA has allowed fraudulent schemes to thrive unchecked.
What about BAFIN, the Dutch DNB and all the other non- performing financial supervisory authorities in Europe?
Yes, financial crime is a significant and growing problem in the UK, making it essential for the Financial Conduct Authority (FCA), the UK’s primary conduct regulator, to fulfill its mandate from Parliament to ensure an appropriate degree of consumer protection.
However, financial crime, particularly cybercrime, is also escalating at an alarming rate across Europe. Unfortunately, the performance of other financial supervisory authorities on consumer protection has been equally poor. For example:
- BaFin: Despite receiving numerous warnings about Wirecard (also from us) Germany’s financial regulator failed to act, allowing the scandal to unfold and cause significant harm to investors and consumers alike.
- DNB: De Nederlandsche Bank was alerted by us as early as 2019 about Payvision’s involvement in fraudulent activities. Yet, their delayed response allowed these activities to persist for far too long.
Consumer protection is a fundamental responsibility of Europe’s financial supervisory authorities. Yet, it continues to be deprioritized, reflecting a systemic failure to address the needs of those most vulnerable to financial and cybercrime. Immediate reforms are needed to elevate consumer protection to the forefront of these authorities’ agendas.
