UK regulatory bodies have fined firms over £1billion since 2007

2 April 2013

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The Fraud Investigation and Dispute Services  team at EY has today released new research revealing that the total fines issued to UK firms and executives for fraudulent activity has exceeded £1billion in the past five years, with 68% of the fines being applied to the financial services industry (which equates to 55% of the total value).

The study collected data from over 700 cases of fraud reported since 2007 using information provided by three major UK governing bodies. The data compared the penalties imposed on firms and individuals alongside the reasons behind the fine. The investigation found that since 2007, UK companies have been fined a total of £976,119,238 whilst individuals have been fined a total of £45,967,462.

The study found that 68% all cases of fraud over the past five years were within the financial services industry, with cases of financial fraud highest in the mortgage industry and specialised finance sector. Overall, the total fines for the financial services industry exceeded regulatory censure.

John Smart, Partner at EY said:

“It is worrying to see that the regulators have needed to step in so frequently and issue punishments of this severity to businesses and executives. Just under half of the penalties handed out in the past five years have been monetary fines and the market, for the most part, is not in a condition for businesses to be losing money due to negligence. These results should serve as a stark warning to all businesses in the UK to get their houses in order.

“Whilst the results vary across different industries, firms should be mindful that these are not isolated situations, and fraudulent actions can occur across all industries and all sizes of business.”

The study’s findings also revealed that individual prison sentences across all regulatory prosecutions ranged from eight months to ten years, with partners and directors receiving the heaviest punishments. The research reveals that since 1997, the average prison stay of a convicted fraudster – either acting individually or on behalf of a company - is 2,000 days.

John Smart concludes:

“The extent and variation in the level of fines and prison sentences sends a clear message to UK businesses and their employees that misconduct will not be ignored. Board members will need to take a good look at what they are doing and undertake a full risk and systems review in order to identify any blind spots and identify who the fraudsters are. Firms that fail to take appropriate action in this area not only risk fines and sentencing, but may also cause irreparable damage to their brand.”

Additional findings from the research include:

  • The average prison sentence for the director of a company that has committed fraud is 3 years and 3 months
  • 45% of all fines in the past five years were between £10,000 and £100,000.
  • The consumer staples industry, incorporating food, beverages tobacco and household goods, had the second largest total of fines and the largest average fine at £56,342,307.75, despite making up just 2% of all cases.