FCA Chair: Investment Fraud has Reached Epidemic Proportions

Financial crime, especially fraud against individuals, has reached epidemic proportions. That’s according to Charles Randell, Chair of the Financial Conduct Authority (FCA), who spoke at the Cambridge Economic Crime Symposium on Wednesday.

“One of the most damaging financial crimes is investment fraud, where people are scammed out of their savings,” Randell said before he posed a number of questions that need to be addressed in order to combat financial fraud.

It is no question that fraud within the financial industry is a real threat for investors. On almost a daily basis, we here at Finance Magnates are covering warnings from global regulators as they flag suspected scams and unauthorized entities.

According to the Crime Survey for England and Wales for 2018/19, the total volume of fraud affecting individuals was 3.8 million cases. This figure made up around one-third of the total volume of 11.2 million crimes.

As Finance Magnates reported, the British regulator has previously stated that fraud within the foreign Exchange Exchange An exchange is known as a marketplace that supports the trading of derivatives, commodities, securities, and other financial instruments.Generally, an exchange is accessible through a digital platform or sometimes at a tangible address where investors organize to perform trading. Among the chief responsibilities of an exchange would be to uphold honest and fair-trading practices. These are instrumental in making sure that the distribution of supported security rates on that exchange are effectively relevant with real-time pricing.Depending upon where you reside, an exchange may be referred to as a bourse or a share exchange while, as a whole, exchanges are present within the majority of countries. Who is Listed on an Exchange?As trading continues to transition more to electronic exchanges, transactions become more dispersed through varying exchanges. This in turn has caused a surge in the implementation of trading algorithms and high-frequency trading applications. In order for a company to be listed on a stock exchange for example, a company must divulge information such as minimum capital requirements, audited earnings reports, and financial reports.Not all exchanges are created equally, with some outperforming other exchanges significantly. The most high-profile exchanges to date include the New York Stock Exchange (NYSE), the Tokyo Stock Exchange (TSE), the London Stock Exchange (LSE), and the Nasdaq. Outside of trading, a stock exchange may be used by companies aiming to raise capital, this is most commonly seen in the form of initial public offerings (IPOs).Exchanges can now handle other asset classes, given the rise of cryptocurrencies as a more popularized form of trading. An exchange is known as a marketplace that supports the trading of derivatives, commodities, securities, and other financial instruments.Generally, an exchange is accessible through a digital platform or sometimes at a tangible address where investors organize to perform trading. Among the chief responsibilities of an exchange would be to uphold honest and fair-trading practices. These are instrumental in making sure that the distribution of supported security rates on that exchange are effectively relevant with real-time pricing.Depending upon where you reside, an exchange may be referred to as a bourse or a share exchange while, as a whole, exchanges are present within the majority of countries. Who is Listed on an Exchange?As trading continues to transition more to electronic exchanges, transactions become more dispersed through varying exchanges. This in turn has caused a surge in the implementation of trading algorithms and high-frequency trading applications. In order for a company to be listed on a stock exchange for example, a company must divulge information such as minimum capital requirements, audited earnings reports, and financial reports.Not all exchanges are created equally, with some outperforming other exchanges significantly. The most high-profile exchanges to date include the New York Stock Exchange (NYSE), the Tokyo Stock Exchange (TSE), the London Stock Exchange (LSE), and the Nasdaq. Outside of trading, a stock exchange may be used by companies aiming to raise capital, this is most commonly seen in the form of initial public offerings (IPOs).Exchanges can now handle other asset classes, given the rise of cryptocurrencies as a more popularized form of trading. Read this Term (Forex Forex Foreign exchange or forex is the act of converting one nation’s currency into another nation’s currency (that possesses a different currency); for example, the converting of British Pounds into US Dollars, and vice versa. The exchange of currencies can be done over a physical counter, such as at a Bureau de Change, or over the internet via broker platforms, where currency speculation takes place, known as forex trading.The foreign exchange market, by its very nature, is the world’s largest trading market by volume. According to the Bank of International Settlements (BIS) latest survey, the Forex market now turns over in excess of $5 trillion every day, with the most exchanges occurring between the US Dollar and the Euro (EUR/USD), followed by the US Dollar and the Japanese Yen (USD/JPY), then the US Dollar and Pound Sterling (GBP/USD). Ultimately, it is the very exchanging between currencies which causes a country’s currency to fluctuate in value in relation to another currency – this is known as the exchange rate. With regards to freely floating currencies, this is determined by supply and demand, such as imports and exports, and currency traders, such as banks and hedge funds. Emphasis on Retail Trading for ForexTrading the forex market for the purpose of financial gain was once the exclusive realm of financial institutions.But thanks to the invention of the internet and advances in financial technology from the 1990’s, almost anyone can now start trading this huge market. All one needs is a computer, an internet connection, and an account with a forex broker. Of course, before one starts to trade currencies, a certain level of knowledge and practice is essential. Once can gain some practice using demonstration accounts, i.e. place trades using demo money, before moving on to some real trading after attaining confidence. The main two fields of trading are known as technical analysis and fundamental analysis. Technical analysis refers to using mathematical tools and certain patterns to help decide whether to buy or sell a currency pair, and fundamental analysis refers to gauging the national and international events which may potentially affect a country’s currency value. Foreign exchange or forex is the act of converting one nation’s currency into another nation’s currency (that possesses a different currency); for example, the converting of British Pounds into US Dollars, and vice versa. The exchange of currencies can be done over a physical counter, such as at a Bureau de Change, or over the internet via broker platforms, where currency speculation takes place, known as forex trading.The foreign exchange market, by its very nature, is the world’s largest trading market by volume. According to the Bank of International Settlements (BIS) latest survey, the Forex market now turns over in excess of $5 trillion every day, with the most exchanges occurring between the US Dollar and the Euro (EUR/USD), followed by the US Dollar and the Japanese Yen (USD/JPY), then the US Dollar and Pound Sterling (GBP/USD). Ultimately, it is the very exchanging between currencies which causes a country’s currency to fluctuate in value in relation to another currency – this is known as the exchange rate. With regards to freely floating currencies, this is determined by supply and demand, such as imports and exports, and currency traders, such as banks and hedge funds. Emphasis on Retail Trading for ForexTrading the forex market for the purpose of financial gain was once the exclusive realm of financial institutions.But thanks to the invention of the internet and advances in financial technology from the 1990’s, almost anyone can now start trading this huge market. All one needs is a computer, an internet connection, and an account with a forex broker. Of course, before one starts to trade currencies, a certain level of knowledge and practice is essential. Once can gain some practice using demonstration accounts, i.e. place trades using demo money, before moving on to some real trading after attaining confidence. The main two fields of trading are known as technical analysis and fundamental analysis. Technical analysis refers to using mathematical tools and certain patterns to help decide whether to buy or sell a currency pair, and fundamental analysis refers to gauging the national and international events which may potentially affect a country’s currency value. Read this Term) and cryptocurrency industry is prevalent. Specifically, £27 million ($34.4 million) was lost by investors to FX and cryptocurrency-related scams in the 2018/2019 fiscal year.

According to the FCA, authorities received 1,834 scam reports last year. That was almost a four-fold increase in the prior twelve-month period.

What is the FCA doing to tackle investment fraud?

According to Randell, the watchdog’s strategy for tackling financial crime can be divided into three parts - focusing on the firms it operates and monitoring their regulated activities, alerting consumers to the risks of scams, and taking action to shut down unauthorized investment businesses.

“Last year we published over 500 consumer alerts about unauthorized firms, and we currently have over 40 live enforcement investigations in this area,” he highlighted during his speech.

The limits of the FCA are limited to what falls under its purview. In addition, its influence is also constrained by politics, which determine how much freedom of choice consumers can have and how much intervention the regulator can take.

“Nevertheless, the FCA is taking action against the sale of specific types of high-risk investment to retail investors. Such as our proposed changes for peer-to-peer lending. Or our ban on high-risk bets on investments. Or our ban on bets on cryptocurrencies."

“We are increasing our activities to disrupt harmful minibond issuance, although because the activity is not currently regulated and much of the issuance is conducted by firms we don’t authorize, there is a limit to what we can do in this space.”

UK regulator calls for internet giants to pull their weight

In the speech, the Chair of the FCA also called for internet giants to pull their weight by better protecting people’s privacy and stopping data breaches, which in turn, can enable a large amount of fraud.

“Major companies can effectively enable a huge amount of fraud,” Randell outlined. “The companies which allow people’s personal data to be stolen. The companies which promote advertisements for scams on the internet and thereby profit from these crimes. Quite frankly, they don’t always play their part in remedying the harm they create.”

While he does recognize that these companies have obstacles such as the internet being dynamic and changing rapidly, as well as there being legal complications, Randell asks for companies to take down suspected fraudulent activity immediately when they are requested to do so by authorities.

“I don’t believe that these measures would prejudice freedom of speech. Or that dissent and democracy in our society will be any weaker if we throw some well-aimed grit into the cogs of the online scammers,” he added.

You can read the full speech here.