What’s Your Game?

June 2021 Martin Woods

On 18th May, Mark Steward, Executive Director of Enforcement & Market Oversight at the Financial Conduct Authority (FCA) gave a speech at the FCA Investigations and Enforcement Summit. The speech was titled – The rise in scams and the threat to the legitimate financial services industry. This followed an acknowledgment from the UK government, which accepted on-line fraud was the fastest growing crime in the UK. Thus, you are far more likely to be mugged on-line than walking down your local high street.

Notwithstanding the ongoing efforts of banks and other regulated firms, all are coming under increasing pressure to prevent fraud. Where they fail, they are being ordered to compensate customers who become victims of frauds undertaken within their accounts.

Funds and assets fraudulently extracted from legitimate financial services industry undermine investor/consumer confidence, fund further crimes and harms victims who suffer losses. The FCA are on the front foot and are now more proactively engaged in confronting the fraudsters and protecting consumers than ever before.

Are you on (top of) the warning list?

One of the tools used by the FCA is a Warning List which is updated almost daily with new scam data, including names of entities and cloned entities (using the name of an existing FCA regulated firm). Consumers are encouraged to use the list to validate the authorised status of firms and protect themselves. Conversely, FCA regulated firms are encouraged to search the Warning List, in order to ensure they do not provide services to, nor facilitate business with any firms named thereon.

One of the highlights of Mark Steward’s speech was listed as:

“However, firms should be doing more to prevent harm also and regulated firms who let down their guard, especially in assisting firms on our Warning List, may well face action from us for doing so as well.”

Some will ponder, does this extend to paying customers’ funds to a party on the list, constitute “letting their guard down” and what are the consequences of doing so?

There are thousands of names on the list, which is presented in date order (most recent updates feature on page one), but the format can be changed to alphabetical order. Behind the names, there are often websites, phone numbers and physical addresses, both in the UK and overseas.

Who or what is behind the list?

It is clear, Mark Steward and the FCA expect firms to use the Warning List and there appear to be consequences for any firms who fail to do so and as a result, provide services or funds to parties on the List. Okay, so what of the people, connected parties and even addresses behind the list? How much due diligence and investigations should a bank/firm undertake in relation to connected parties on the FCA Warning List?

The fact is, these scams are seldom isolated or orphans, many are connected to each other, some feed off each other, by offering to recover funds for victims, for a fee, of course. The same parties are behind multiple frauds and often, the same addresses are used. This poses the question, should firms be searching or monitoring the addresses used by the fraudsters, many of which are accommodation addresses.

Fixed Rates Finder

A week after Mark Steward’s speech, the FCA updated the Warning List with details of a suspected scam named, Fixed Rates Finder, with an address of 12 Constance Street, London E16 2DQ. The address is also known as International House and as of 31 May 2021, some 8944 UK incorporated entities have been registered at this address, it is a business accommodation address. None of the UK entities is called Fixed Rates Finder.

12 Constance Street is also listed as a virtual office, near to London City Airport and is designated as the postal address for corporate entities connected to a company called Registered Address Ltd. The registered address of this company is shown as International House, 24 Holborn Viaduct, London EC1A 2BN (There are 7513 UK incorporated entities registered at this address) and one of the company officers is registered at International House, 124 Cromwell Road, London SW7 4ET (There are 569 UK incorporated entities registered at this address). These addresses are in turn connected to other “International House” addresses across London. There are also International Houses in Scotland and Wales, listed upon a website for this group.

So, what is Fixed Rates Finder? The FCA have caused the website for this alleged scam to be suspended and advised potential victims to contact them. Presently, we do not know if there is/was a legal entity and where such an entity may have been incorporated. What we do know is the parties behind this suspected scam made use of an accommodation address in East London. What we do not know, is how they were able to use the address within promotions of a suspected scam. Following the publication of the FCA warning, we do not know what actions the address providers have taken.

Action

Ultimately, when combatting fraud, this is all about action. Specifically, the FCA have stated, “The FCA has a substantial role to play here and we are upping our game. We need all of you to do so as well if there is to be a truly effective force field in place.” Thus, what is your game and will it meet with FCA approval? What more can you do to counter the threats from and damage caused by fraud? The answer may lie in the abstract, the sub data, behind the FCA Warning List, including the accommodation addresses the fraudsters use.

Whilst the FCA endeavour to be proactive in the fight against fraud, the fact is the Warning List is substantially reactionary. Consequently, your firm may already be contaminated by and engaged with one of these parties by the time the FCA add the name to the Warning List. Using the address data will present firms and banks with a greater opportunity to identify potentially fraudulent schemes and parties.

In the event this does not fit into your game plan, you may find yourself offside. The data is available and when deployed it produces benefits to all. All, except the fraudsters, who will be frustrated as their attacks upon your firm/bank fail, because of the improvements in your defence.

Penalty

Failure to improve your game, resulting in a weakened and slow defence will put your bank/firm at risk. Such weaknesses will present as a vulnerability and opportunity to fraudsters who will exploit it. Subsequently, such firms/banks will become the focus of unwanted regulatory attention and penalties will likely follow. The data could be a game changer and enable firms/banks to facilitate the prevention of frauds by forwarding details of other potential frauds, which the FCA can add to the Warning List. When working together, operating a press defence there is an increased likelihood, your game will improve and together, we will win.