Executives Unaware of Regulatory Fines
Senior executives underestimate the size of fines they face for a failure of financial controls
Jim Muir
AutoRek, the financial data management provider, has released new research revealing that more than three quarters (76 per cent) of business executives are unaware they could face fines of more than £5 million for a regulatory breach of financial controls.
Survey Highlights Widespread Knowledge Gaps
In the survey of senior executives across banking, insurance, asset management and IT, a large proportion of respondents demonstrated ignorance of how much they could be fined for a regulatory breach in the financial controls area. In total, 66 per cent believe the maximum fine is less than £1 million, with more than one third (37 per cent) admitting that they think the maximum fine is less than £250,000. Despite it being common to see the UK’s Financial Conduct Authority (FCA) fine companies several million pounds for having lax controls, just a quarter of respondents (24 per cent) believe that a fine of over £5 million is actually possible.
Industry Expert Reacts to Findings
Jim Muir, director of AutoRek, comments on the latest findings: “The results are naïve in the extreme. The size of fines is getting bigger and even relatively trivial breaches in quite small companies are topping £250,000. Today’s regulators and policy makers are taking a much more aggressive stance with businesses that fail to introduce adequate controls and the penalties for non-compliance are severe.”
Statistics on Recent FCA Penalties
Jim Muir continues: “So far this year, more than half (52 per cent) of the fines published by the FCA have been for more than £1 million and a third (33 per cent) equated to more than £5 million. These fines are a significant threat to business viability since they damage the capital base and client attrition. To avoid being caught out, organisations need to focus on introducing new measures, such as reconciliations, record keeping and the segregation of duties, which can form the basis of control frameworks and help identify any anomalies to ensure that suspicious activities are escalated and resolved in a timely manner.”
Senior executives underestimate the size of fines they face for a failure of financial controls
Jim Muir
AutoRek, the financial data management provider, has released new research revealing that more than three quarters (76 per cent) of business executives are unaware they could face fines of more than £5 million for a regulatory breach of financial controls.
In the survey of senior executives across banking, insurance, asset management and IT, a large proportion of respondents demonstrated ignorance of how much they could be fined for a regulatory breach in the financial controls area. In total, 66 per cent believe the maximum fine is less than £1 million, with more than one third (37 per cent) admitting that they think the maximum fine is less than £250,000. Despite it being common to see the UK’s Financial Conduct Authority (FCA) fine companies several million pounds for having lax controls, just a quarter of respondents (24 per cent) believe that a fine of over £5 million is actually possible.
Jim Muir, director of AutoRek, comments on the latest findings: “The results are naïve in the extreme. The size of fines is getting bigger and even relatively trivial breaches in quite small companies are topping £250,000. Today’s regulators and policy makers are taking a much more aggressive stance with businesses that fail to introduce adequate controls and the penalties for non-compliance are severe.”
Jim Muir continues: “So far this year, more than half (52 per cent) of the fines published by the FCA have been for more than £1 million and a third (33 per cent) equated to more than £5 million. These fines are a significant threat to business viability since they damage the capital base and client attrition. To avoid being caught out, organisations need to focus on introducing new measures, such as reconciliations, record keeping and the segregation of duties, which can form the basis of control frameworks and help identify any anomalies to ensure that suspicious activities are escalated and resolved in a timely manner.”
