Industry Must do More to Protect Public From Financial Fraud

The Chairman of the UK’s financial regulator has said more has to be done to protect the public from financial scams around investments and pensions products.

Charles Randell, (pic) Chair of the FCA, was speaking at the Cambridge Economic Crime Symposium where he said financial crime, specifically fraud against individuals, has reached “epidemic proportions”.

He added: “We can’t say exactly how much financial crime there is, but it’s a very serious epidemic. The Crime Survey for England and Wales for 2018/19 puts the total volume of fraud affecting individuals at 3.8 million cases, around one third of the total volume of 11.2 million crimes. The figures for financial crimes against businesses are on top of that.

“The Office of National Statistics research concludes that fraud is very significantly under-reported and under-recorded. Fewer than one in six incidents of fraud are reported to either the police or Action Fraud. The scale of loss to the private sector from fraud every year is estimated at over £140 billion.”

Mr Randell explained under the Financial Services and Markets Act 2000 the FCA has the power to prosecute a number of criminal offences. These include carrying on unauthorised business and issuing unapproved financial promotions, as well as misleading statements and market manipulation in relation to certain investments. There is also the potential to launch private prosecutions for other offences including fraud.

One of the biggest issues was around pension he added; “A number of the victims of skimming and scamming are pension scheme members who have been persuaded to make poor decisions when exercising their new-found freedoms to transfer out of a defined benefit scheme.

“Exercising this freedom is unlikely to be in the interests of the majority of pension scheme members. We don’t know exactly how many people have been scammed into transferring their pension pots to fraudsters or skimmed by bad advice to switch to inappropriate high risk or poor value investments, but it’s clear that it could be a large number. And we’ve identified that over 5 million pension savers are in danger of falling for the tactics used by scammers.”

“We have a system which allows, and sometimes now demands, that individuals take potentially very difficult and risky decisions about their savings,” added Mr Randall. “Of course, whether you believe in individual responsibility and freedom of choice, or more intrusive regulation to protect consumers, is to some extent a political question, so government policies in this area are subject to political change. As a regulator, we must deliver the best protection for consumers that we can, in the light of choices made by politicians. But even when we are at our very best, more individual responsibility and freedom of choice are likely to mean more risk to consumers.”