Highest FCA Fines of 2018

Posted by

Emmeline de Chazal

on 14 Dec 2018


FCA fines slumped in 2018 to only £60.5m having totalled almost four times that amount in 2017! To put this into perspective, the highest fine in 2017 alone exceeds this grand total. 

Highest FCA Fines of 2018

Despite the significant drop in the total amount of fines issued, the FCA was kept busy. The number of fines issued in 2018 outnumbered that of 2017. The difference lies in the fine amounts; 2018 saw fewer hefty fines.

Top 10 FCA fines in 2018

  1. Santander UK plc (fined £32.8m)
  2. Tesco Personal Finance plc (fined £16.4m)
  3. Liberty Mutual Insurance Europe SE (fined £5.2m)
  4. Vanquis Bank Limited (fined £1.9m)
  5. Interactive Brokers (UK) Limited (fined £1m)
  6. Canara Bank (fined £896k)
  7. One Call Insurance Service Limited (fined £684k)
  8. John Lawrence Radford (fined £468k)
  9. James Edward Staley (fined £321k)
  10. Guillaume Adolph (fined £180k)

We continuously track the largest FCA fines. It appears that 2018 is quite a remarkable year with the fines in 2019 exceeding £300m, FCA fines in 2020 totalling an amount north of £190m and fines in 2021 reaching record levels.

1. Santander UK plc (fined £32.8m)

The FCA fined Santander £32,817,800 for failing to effectively process the accounts and investments of deceased customers.

It was found that Santander did not transfer funds, totalling over £183,000,000 to beneficiaries when it should have done. Due to this failure, 40,428 customers were directly affected. In addition to this, Santander also failed to disclose information to the FCA as they became aware of it. This information relates to issues the bank experienced with the probate and bereavement process.

Mark Steward, Executive Director of Enforcement and Market Oversight at the FCA, said:

'These failings took too long to be identified and then far too long to be fixed. To the firm’s credit, once these problems were notified to the board and senior management, they were fixed properly and promptly. But recognition of the problem took too long. Firms must be able to identify and respond to problems more quickly especially when they are causing harm to customers. The FCA will continue to be on the lookout for firms with poor systems and controls and will take action to deter such failings to ensure customers are properly protected.'

Santander breached Principle 3 and Principle 6 between 1 January 2013 and 11 July 2016 by failing to take reasonable care to organise and control its probate and bereavement process. This was not handled responsibly and effectively and with adequate risk management systems. Santander also failed to treat its customers and those who represented them on their death fairly.

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2. Tesco Personal Finance plc (fined £16.4m)

The FCA fined Tesco Personal Finance plc (Tesco Bank) £16,400,000 for failing to exercise due skill, care and diligence in protecting its personal current account holders against a cyber attack. The cyber attack occurred over a 48-hour period in November 2016 which netted the cyber attackers £2.26m.

Cyber attackers exploited deficiencies in Tesco Bank’s design of its debit card, its financial crime controls and in its Financial Crime Operations Team to carry out the attack. Those deficiencies left Tesco Bank’s personal current account holders vulnerable to a largely avoidable incident. Tesco Bank was found to be in breach of Principle 2 which requires a firm to conduct its business with due skill, care and diligence.

Mark Steward, Executive Director of Enforcement and Market Oversight at the FCA, said:

'The fine the FCA imposed on Tesco Bank today reflects the fact that the FCA has no tolerance for banks that fail to protect customers from foreseeable risks. In this case, the attack was the subject of a very specific warning that Tesco Bank did not properly address until after the attack started. This was too little, too late. Customers should not have been exposed to the risk at all. 

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3. Liberty Mutual Insurance Europe SE (fined £5.2m)

On 30 October 2018, the FCA fined Liberty Mutual Insurance £5.2m, over failures in its oversight of mobile phone insurance claims and complaints handling.

The final notice explains that Liberty breached Principle 3 (Management and Control) and Principle 6 (Customers’ interests) of the FCA’s Principles for Businesses in the oversight of its mobile phone insurance claims and complaints handling processes administered through a third party.

In 2013, the FCA published a Thematic Review setting out its expectations for the mobile phone insurance market and it followed this up with a further publication in December 2015. The regulator also produced a Thematic Review reiterating insurers’ regulatory obligation for overseeing outsourcing arrangements in 2015.

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4. Vanquis Bank Limited (fined £1.9m)

Credit card lender, Vanquis, was issued a fine of £1,976,000 for failing to disclose the full price of an add-on product, called Repayment Option Plan (ROP). In addition to this amount, the firm will also repay an estimated £168,781,000 in compensation. This amount makes up the charges not disclosed to customers when they bought the ROP.

The FCA has ordered Vanquis to repay the interest customers were charged on the ROP from 1 April 2014 to when customers were informed of the full ROP cost.

Since June 2003 the ROP was offered to all Vanquis credit card customers as a way of helping them to manage their account. Vanquis has voluntarily decided to compensate customers who bought the ROP before the FCA had the responsibility of regulating the consumer credit market.

Mark Steward, Director of Enforcement and Market Oversight at the FCA, said:

'Vanquis failed to make sure customers were informed about the full cost of the ROP when it was offered to customers. Most Vanquis customers chose the ROP to help manage their credit without realising instead that the product might lead to their indebtedness increasing. Customers are entitled to be told all relevant information when being offered financial products. These were very serious breaches.

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5. Interactive Brokers (UK) Limited (fined £1m)

The FCA has imposed a financial penalty on Interactive Brokers (UK) (IBUK) amounting to £1,049,412. This is for failings in its post-trade systems and controls and not reporting suspicious client transactions in the period February 2014 to February 2015 (‘the Relevant Period’).

IBUK outsourced its post-trade monitoring to a team that was based at another company within the Interactive Brokers Group in the US. However, IBUK failed to carry quality assurance or monitoring of the review of the reports, and it failed to ensure that the staff conducting the reviews were adequately trained. The FCA found that the IBUK did not sufficiently input into the design and calibration of the post-trade monitoring systems.

In essence, this increased the risk of IBUK failing to submit suspicious transaction reports (STRs) to the FCA. During the Relevant Period, the FCA identified that there were three incidents of suspicious trading by IBUK's clients and IBUK failed to submit any STRs in relation to insider dealing.

Mark Steward, Director of Enforcement and Market Oversight at the FCA, said:

'Firms not only have a key responsibility to report suspicious conduct in our capital markets, they also have an obligation to ensure their trading systems are not used for the purpose of financial crime. IBUK's systems were inadequate and ineffective in the face of potentially suspicious transactions...'

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6. Canara Bank (fined £896k)

On the 6th of June 2018,  the FCA issued a Final Notice explaining the penalty on the Indian state-owned bank, Canara Bank. The Bank was fined £896,100 which was coupled with a restriction, preventing them from accepting deposits from new customers for 147 days.

It is a requirement for all financial services firms to maintain robust anti-money laundering (AML) systems and controls. However, Canara failed to ensure AML compliance between November 2012 and January 2016 and they didn't take sufficient steps to amend the identified weaknesses. This was in spite of FCA's notification of their AML systems and controls shortcomings.

Mark Steward, Executive Director of Enforcement and Market Oversight at the FCA, said:

“Financial crime and money–laundering failures are areas of focussed priority for us. Canara was warned its money laundering controls were inadequate and so its failure to remediate them properly is at the more serious end of the range of sanctions.”

AML Compliance & Training Roadmap

7. One Call Insurance Service Limited (fined £684k)

The FCA decided to fine One Call Insurance Sevices Limited an amount of £684,000 and impose a restriction on One Call for 121 days from the date the Final Notice is issued.  This restricts the company from charging renewal fees to its customers during this period. It is estimated to cost the company approximately £4.6 million.

The FCA found that One Call failed to arrange adequate protection for its client money, breaching Principle 10 of the FCA’s Principles for Businesses and the Client Money Rules.

One Call received money between January 2005 and September 2014 which was defined as client money under the Client Money Rules. Therefore, One Call was required to ensure it protected that client money. However, it failed to appreciate that certain Terms of Business Agreements it wrote business under, did not provide effective risk transfer. One Call also failed to operate its client money account in accordance with the Client Money Rules. Secondly, from 1 December 2009, One Call failed to treat funds advanced by a third party premium finance provider as client money. This was with respect to years two and three of an annual motor policy with a subsequent two-year renewal price guarantee.

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8. John Lawrence Radford (fined £468k)

CF1 director and majority shareholder at One Call, Mr Radford was fined £468,600. Furthermore, he is prohibited from having any responsibility for client money and/or insurer money in relation to regulated activity in financial services.

Essentially, Mr Radford failed in his duties as he lack an adequate understanding of the FCA's requirements in relation to client money. Furthermore, he failed to take reasonable steps to learn of the relevant regulatory requirements. Mr Radford did not respond adequately to warnings and ultimately failed to ensure that One Call had the necessary systems and controls in place to handle client money according to the Client Money Rules.

Mr Radford has agreed to settle at an early stage of the investigation. This qualifies him for a 30% discount. If not for the discount, he would have faced a fine of £669,531 which nearly equals the amount imposed on the company.

9. James Edward Staley (fined £321k)

The FCA and the Prudential Regulation Authority (PRA) fined Mr James Staley, Chief Executive of Barclays Group (Barclays), a total of £642,430. According to the Final Notice, Mr Stanleu agreed to settle which allowed him to qualify for a 30% discount.  The FCA and PRA found that Mr Staley failed to act with due skill, care and diligence when responding to an anonymous letter received by Barclays in June 2016.

Mark Steward, FCA Executive Director of Enforcement and Market Oversight, said:

“Given the crucial role of the Chief Executive, the standard of due skill, care and diligence are more demanding than for other employees.

“Mr Staley breached the standard of care required and expected of a Chief Executive in a way that risked undermining confidence in Barclays’ whistleblowing procedures. Chief Executives must act with a high degree of care and prudence at all times. Whistleblowers play a vital role in exposing poor practice and misconduct in the financial services sector. It is critical that individuals are able to speak up anonymously and without fear of retaliation if they want to raise concerns.”

The investigation found that Mr Staley made serious errors of judgement. Although there was no personal gain in this situation, both regulators viewed his misconduct as sufficiently serious. As a consequence, each authority imposed a penalty of 10% of Mr Staley’s relevant annual income.Whistleblowing Policy Tips

10. Guillaume Adolph (fined £180k)

Former short-term interest rate trader at Deutsche Bank, Guillaume Adolph, was fined £180,000 and banned from performing any function in relation to regulated financial activity.

In the Final Notice, the FCA found that Mr Adolph's conduct was reckless and had the potential to harm other market participants. He closed his mind to these risks and this behaviour is improper.

Mark Steward, Director of Enforcement and Market Oversight at the FCA said:

“Mr Adolph improperly influenced several of Deutsche’s LIBOR submissions in disregard of standards governing LIBOR submissions. Mr Adolph’s misconduct threatened the integrity of important benchmarks. He should have no further role in the financial services industry.”

Furthermore, Mr Adolph was also knowingly concerned in Deutsche’s failure to observe proper standards of market conduct. In light of this, the FCA has determined that he is not a fit and proper person to perform any regulated financial activity. 

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