Part of this jump is driven by the recent LIBOR-related and other landmark penalties that have been issued, the group said, pointing out that the change from 2011/2012 to 2012/2013 “represented an additional 511% growth in average size per penalty”.
But, it added: “Although 2012/2013 may be an outlier as far as regulatory activity, this spike nevertheless reinforces the trend that regulators are increasingly looking to bring severe action against big-ticket violations.
The trend toward higher fines is visible across the pond in the US, with the level of fines imposed by the SEC rising 36% across the same period.
At the same time that the value of fines imposed has increased, so too have the resources available to the regulators to uncover and prosecute financial transgressions.
Between 2006 and 2013, Kinetic Partners said: “the SEC, FCA and and Hong Kong’s SFC have increased the number of employees by approximately 22%, 53% and 51%. During that same period, the SEC, FCA and SFC increased their overall expenditure by 62%, 48% and 120%.”
What has declined, however, is the number of new cases opened. According to Kinetic, approximately 12% fewer cases were opened each year since March 31, 2008 in the UK, and the number of cases closed each year decreased at a comparable rate (approximately 10% per year).
A greater focus on individuals
While fines imposed on individuals accounted for only 1% of the total fines imposed in calander year 2013 in the UK, Kinetic points out that “the number of fines that the FCA brought against individuals (20) accounted for 44% of the total number of cases during that same period.
“The FCA has historically focused on control functions, rather than wrongdoers, hence the majority of fines issued in 2013 have related to firms,” it said.
But, it added: “Pressure from the public and media following the financial crisis has however led to calls for wider individual culpability."
“Greater focus on individuals has appeared on the regulatory agenda of the FCA with the recent passage of certain pieces of legislation, such as the Banking Reform Act of 2013, part of which places greater personal responsibility on CEOs and heads of risk in cases of market misconduct or financial impropriety.”
According to Nick Matthews, senior member of forensic and corporate recovery practice at Kinetic Partners:
"Our research shows that British firms continue to be fined and demonstrates the increasingly tough stance that regulators are taking against financial services firms. Regulators have certainly publicised their efforts to increase enforcement activity and deter negligent or harmful behaviour. For those working in financial services firms with oversight responsibilities, ensuring you have done everything you can to mitigate the risk is becoming ever more important.”
