Written on 21/04/2023

On 11th April 2023, a "failure to prevent fraud" offence was introduced in an amendment to the Economic Crime and Corporate Transparency Bill. 

The introduction of this offence is the most significant change in financial crime legislation and is a game-changer for retail financial services.  No one in our industry can fail to notice the action that lawyers and regualtors around the world are taking against Barclays, Deutsche Bank, JP Morgan Chase and former CEO of Barclays Jes Staley, for their association with Jeffrey Epstein.  "How was I supposed to know he was a paedophile?" is their defence.  Now the law change of "failing to prevent fraud" is likely to trigger even more radical change to compliance programmes in large companies.

Under the current drafting, which only applies to large firms, they will be subject to an unlimited fine if they did not have in place reasonable fraud prevention procedures.  It is an odds on certainty that the FCA will also be prosecuting with this in mind, given they hold the advantage that most of the protections afforded by law - such as your right to silence - do not apply to FCA regulated firms, nor their staff.

At present the law will only apply to large companies with more than 250 staff, but you can see where this is all going.   For  mortgage brokers consider the offence of "failing to disclose" being buried in the text.  And the big lenders and providers will be even more trigger happy to chuck brokers off their panels.  Another potential risk for insurance side is where the insurer receives complaints about unsuitable sales made by one broker. Failing to take action could lead to prosecution against the insurer.  Risk aversion is spreading fast, and IFAs and brokers must work within this framework. 

All news