Fines and prison sentences issued by UK regulators are increasing, says EY study


01-12-2015

UK regulators have been issuing tougher punishments to companies found guilty of wrongdoing, EY’s Investigations Index has revealed. The study, which analysed fines and criminal prosecutions against business and individuals, showed that the average fine issued has increased from £10.8m to £42.3m over the last two years, equating to a 291% increase.

 
  • The total sum of fines issued to businesses and individuals by the UK’s key regulatory bodies has increased by 271% over the past two years
  • The total amount of prison time sentenced has increased by 124% over the same period
  • £2.45bn worth of fines were issued in the past two years
  • Company directors face average prison sentences of four years or more

 The total amount of fines has similarly increased by 271% over the same period, totalling £2.45b of penalties since 2013.

The Index examined a total of 231 cases from 1 October 2013 – 30 September 2015, and was based on data from regulatory bodies including the Financial Conduct Authority (FCA), Serious Fraud Office (SFO), Competitions and Markets Authority (CMA) and the Office of Fair Trading (OFT).

Regulators are getting tougher on financial crime

John Smart, Head of EY’s UK Fraud Investigation & Dispute Services team, commented: “UK regulators are getting tougher on financial crime. In the wake of recent corporate scandals and growing political pressure, there seems to be a greater focus by the regulators to pursue cases that may once have been considered ‘too difficult’, to ensure those responsible for wrongdoing are held to account.

“The Index findings should also serve as a warning to companies, to review their processes on a regular basis. The top reasons for fines identified in our research, namely systems failings, business misconduct and misleading information, were all factors that could have been potentially avoided by having stronger control processes to identify and resolve any corporate blind spots.”

More prison sentences, but shorter spells behind bars

The study also found that the average prison sentence – issued following an investigation by one of the four regulatory bodies - has decreased by 40%, from 87 months to 52 months over the past two years. However, this is still three times longer than the one year and four month average sentence issued in the UK as a whole in 2014.

According to EY’s analysis, the UK’s regulatory bodies are handing out more prison sentences, with the amount of all prison time increasing by 124% in the last two years.

Sanjay Bhandari, Partner in EY’s UK Fraud Investigation & Dispute Services team added: “Historically, the management of owner-operated companies have tended to be more likely to be the subject of individual prosecutions for white collar crime as they may be less complex cases.

“However, increasingly, regulators and law enforcement agencies seem to be demonstrating a greater willingness to take on individuals in more complex organisations.”

Additional findings from the research include:

  • 58% of cases investigated by the SFO resulted in prison sentences
  • 56% of the cases the FCA investigated resulted in fines
  • Of the 82 cases investigated by the FCA over the course of two years, 25 were against individuals
  • Of those 25 cases, 36% resulted in prison sentences
  • 10% of all cases dealt with individuals or firms committing fraud
  • Of the 125 cases investigated by the CMA and OFT in the past two years, 119 were due to a proposed or completed merger or acquisition


About the research:

Data was collected on cases investigated by the Financial Conduct Authority (FCA), Serious Fraud Office (SFO), Competition & Markets Authority (CMA) and Office of Fair Trading (OFT)*. The research was conducted via the relevant authority websites, official press statements, and from further news sources including: BBC News, Accountancy Age and Legal Week. It is important to note that this research does not take into account any investigations that have not been announced by the relevant authorities, or that have not yet resulted in any penalties or reprimand.


* Cases from the OFT were included between 1st October 2013 and 31st March 2014, as the CMA was founded on the 1st April 2014, when it took over the functions of the OFT. All data post 1st April 2014 comes from the FCA, SFO and CMA


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For further information please contact Rosanna Lander, EY media relations on – 0207 951 6430 / 07952 351 018.

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