Partner Article

Fraudulent businesses rack up £1bn of fines

The number of fines issued to UK firms and executives for fraudulent activity has exceeded the £1bn mark, research from Ernst & Young suggests.

According to the study, 68% of fines applied to the financial services industry, with cases of financial fraud highest in the mortgage industry and specialised finance sectors.

The consumer staples industry, which incorporates 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.

John Smart, Partner at Ernst & Young 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 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.”

The study collected data from over 700 cases of fraud reported since 2007 using information provided by three major UK governing bodies.

This was posted in Bdaily's Members' News section by Tom Keighley .