Executives Unaware of Fines for Regulatory Breaches

More than three in four business executives are unaware that they could potentially incur fines of more than £5m for a regulatory breach of financial controls, claims AutoRek.

The UK-based financial data management provider reports that in its survey of senior executives across banking, insurance, asset management and IT, a large proportion of respondents demonstrated ignorance of how much they could be fined for a regulatory breach in the financial controls area.

In total, 66% believe the maximum fine is less than £1m, with 37% admitting that they think the maximum fine is less than £250,000. Despite it being common to see the UK’s Financial Conduct Authority (FCA) fine companies several million pounds for having lax controls, just 24% of respondents believe that a fine of over £5m is actually possible.

“The results are naïve in the extreme,” said Jim Muir, director of AutoRek. “The size of fines is getting bigger and even relatively trivial breaches in quite small companies are topping £250,000. Today’s regulators and policy makers are taking a much more aggressive stance with businesses that fail to introduce adequate controls and the penalties for non-compliance are severe.

“So far this year, 52% of the fines published by the FCA have been for more than £1m and 33% equated to more than £5m. These fines are a significant threat to business viability since they damage the capital base and client attrition.

“To avoid being caught out, organisations need to focus on introducing new measures, such as reconciliations, record keeping and the segregation of duties, which can form the basis of control frameworks and help identify any anomalies to ensure that suspicious activities are escalated and resolved in a timely manner.”


Related reading