Global financial regulators appear to have shifted tactics in the past year, moving from hitting firms with large fines to sanctioning individuals for failing to prevent misconduct, suggests a report from London, U.K.-based law firm Duff & Phelps.
According the report, Global Enforcement Review 2018, total penalties are forecast to be lower this year. Through the first six months of this year, enforcement penalties totalled US$8.1 billion, compared with US$18.35 billion for the same period in 2017. The decline in fines is particularly evident in the United States, United Kingdom and Europe, the report says.
“Massive fines on firms have lost their power to shock, not just in the industry but also among the public. The declining penalty amounts from previous years in the U.K. point to the end of the big benchmark manipulation cases but also potentially suggests a change in regulators’ enforcement approach and their faith in the ability of big fines alone to change culture. Regulators globally are also using a wider range of enforcement tools in an attempt to improve conduct,” says Nick Bayley, managing director of regulatory and compliance consulting at Duff & Phelps, in a statement.
“The U.K. regulators have led the way in promoting the importance of individual accountability … As a result, we can expect the Financial Conduct Authority to increasingly focus on enforcement action against individuals as it seeks to make the new regime bare its teeth,” he adds.
The U.S. was the leader in total global penalties in 2017, the report says, accounting for 94% of the global total against firms and 99% against individuals. In the U.S., total penalty amounts against firms and individuals rose by 2% and 23%, respectively, from 2016 to 2017.