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Regulatory review will probe role in countering fraud

The regulator is launching a thematic review into banks’ procedures for finding and containing investment fraud.

At the FSA financial crime conference last week, acting director for enforcement Tracey McDermott said the FSA will examine how banks can prevent fraudulent operations such as Ponzi schemes and boiler room fraud.

He said the review will probe the role of the banks in countering these unauthorised businesses, which depend on victims making payments from, and sometimes to, UK bank accounts.

She said such schemes may have been prompted by low inv-estment returns offered by mainstream financial institutions.

The regulator has shut down three big pyramid schemes over the last 12 months and McDermott claimed public tip-offs were invaluable in this work.

She said the FSA continues to receive thousands of complaints about boiler room schemes each year but only a fifth have fallen victim to the schemes.

She attributes this to the FSA’s public awareness campaigns and close co-operation with law-enforcement agencies.

The FSA is also launching a review into corruption and bribery and held a panel session discussing the new Bribery Act, with representatives from the Serious Fraud Office and Ministry of Justice.

Concept Financial Planning managing director Paul Rich– ardson says: “It is a bit like locking the door once the horse has bolted. It is probably a good thing the FSA is doing this but the banks should have the systems in place to deal with these problems without this kind of review.”

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