FCA defies its own watchdog and refuses to refund fraud victim

| Author: Tony Imossi (Secretariat) | Filed under: General News
FCA defies its own watchdog and refuses to refund fraud victim

The Financial Conduct Authority has refused to reimburse a fraud victim despite a watchdog describing the regulator as 'a facilitator' to her losing £13,000 in an investment scam.

The woman from London, who did not wish to be named, invested money in what she thought was a legitimate Austrian company in May 2018.

However, it turned out that fraudsters had taken advantage of an incorrect listing on the FCA's official register from 2005 to create a fake investment firm.

The register is a public record that displays the details of firms that have been authorised and regulated by the FCA, or have a passport to provide services in the UK.

She wrote to the Complaints Commissioner, which oversees complaints against the FCA, who concluded the regulator should make a goodwill payment of 50 per cent of what she lost due to its 'serious failings' that 'contributed to her financial loss'.

But the FCA rejected the Commissioner's recommendation and refused to pay out, claiming that the victim 'received sensible guidance from the FCA before investing, which was not followed.'

In his eight-page report in April this year, the Commissioner Antony Townsend noted that this was the second case in 12 months where the FCA's lax administration of its register had played a role in an investor becoming a victim of fraud.

In the case of the female victim who wrote to This is Money, the FCA's predecessor - the Financial Services Authority - misspelled the name of a legitimate Austrian firm that was passporting into the UK in 2005, creating a faulty listing.

The Austrian authorities informed the UK regulator a year later, in August 2006, that this misspelled firm – labelled Firm X in the Commissioner's report – should have its passport revoked and be removed from its register.

Instead of de-registering it however, the Austrian firm was registered under its correct name – meaning that 'two registered passport firms were created when there should have been none.'

Both the FCA and the Complaints Commissioner said they couldn't tell This is Money the name of the original firm.

Fast-forward 12 years later, in mid-2018 our reader came across the fraudulent cloned firm, which she told This is Money was called 'Helmut Kub' who was offering a decent return on her money.

With little information on the firm, she called the FCA on 16 May to confirm the company was legitimate.

The FCA employee told our reader that she needed to speak to the Austrian regulator.

But they did not mention the original Austrian firm - that wanted to be put on the register in 2005 - was only allowed to sell insurance products, when our reader was asking about savings.

She invested a day later, and for a second time on 1 June.

She told This is Money she had contacted the Austrian financial regulator, 'but they never replied to my email'. She also maintained that her issue was that Helmut Kub was listed on the FCA's register.

It was also revealed through Freedom of Information that the FCA was made aware of cloning of the original Austrian firm on 2 May 2018.

The FCA finally de-registered Firm X on 3 July 2018, some two months after it was warned X's place on the register was being exploited by fraudsters.

This was also nearly two months after our reader invested £13,000 into the scam, and 13 years after Firm X was mistakenly put on the register.

The 2006 duplicate entry was only removed from the register four months ago, in February 2019.

While the Commissioner concluded that our reader should have waited for a reply and the FCA's advice was 'good', he said this did not invalidate her complaint.

He wrote: 'In this case the FCA's failings with respect of the register are unusually serious and significant - the register is incorrect as a direct result of two serious errors.

'The FCA for 12 years showed a de-authorised Austrian company as registered despite having information that it should not be.

'Although the FCA cannot be held responsible for the criminal behaviour of others, the serious failings contributed to your financial loss.

'If Firm X had been de-registered in 2006, you might not have lost your investment in the way you did.'

In its response on 7 May 2019, the FCA rejected this.

It said it did not believe there was any evidence to suggest the complainant had checked the register in this case, and following the advice it gave 'we do not think an ex-gratia compensatory payment is appropriate.'

When This is Money raised to the FCA the fact the Complaints Commissioner had considered this point and still felt the FCA should pay the victim back £6,500, the regulator said it had no further comments to add.

It means the investor in question is still £13,000 out of pocket and the FCA has defied what the Complaints Commissioner has said.

She told This is Money: 'The FCA totally let me down, especially after the Complaints Commissioner highlighted a fair way for them to make amends.

'I knew I'd only get half my money back because I was duped, but when the FCA refused to pay anything, it left me gutted.

'There's no system of support.'

Source:  The Daily Mail

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